Looks like more
short-covering in the Banks and Brokers.
Comments & Outlook
Yesterday, I pointed you to Suncor, saying that at the cycle bottom for the
broad market that I feel will come in the next couple months, traders should be
accumulating shares of Canadian oil sands companies, like SU. My reasoning is
simple: The US needs oil independency, which can only be done with supplies that
are close by and in a solidly pro-American country. Mega-billions are being
spent on pipelines that will transport the oil to US refineries along the Gulf
coast.
So, please keep on top of this situation. SU has dropped about -8.0%
in the past two days, closing at 56.55, hitting a low of 54.06. Write some
Dec-08 50 and 47.50 puts, now and over the next month or two. As I see it, the
stock is not going back to 45, unless Crude Oil goes back to
80, and your put premiums protect you down to that level.
Unlike Canada, Russia is not so friendly to US political interests, but it
too is a massive and rapidly growing market that, with a heavy dose of country
risk, is attracting much foreign investment.
Interesting to me that Blackrock, Mackenzie Financial, Van Eck Funds and BGF
Emerging Europe and others are buying heavily into Russia's biggest oil
producer, OAO Rosneft (ROSN.GB). The stock price zoomed from US$6.68 to $12 in
three months recently, later setting a high of $12.33, and is still hanging in
at very high prices, with heavy volume.
Rosneft is a vertically-integrated Russian oil and gas company headquartered
in Moscow, with upstream and downstream operations in each of Russia’s
oil-producing regions. Rosneft operates ten oil and gas producing enterprises
across Russia and is involved in over ten world-class exploration projects. The
market cap is apparently $114 billion (see www.adr.com). The stock may be hard
to buy for retail accounts, and so I will not write about it further.
I note that the Russian Federal Anti-Monopoly Service has brought lawsuits
this week against LUKoil, Gazprom Neft, TNK-BP Holding, Rosneft, and
Surgutneftegas over alleged monopoly abuse, which pushed up wholesale prices for
jet and diesel fuel in Russia.
Everybody is screaming about the high price of energy, but it is coming down
now to facilitate a summer rally in the global equity market. This is the time
for traders to be watching the Accumulation Zone stocks for Buy Alerts. A couple
days ago, my Cara 100 tables started popping up such items, and yesterday the
prices started to zoom.
Day traders and short-term oriented swing traders will play this rally. Last
week, if you recall, I noted that the markets were way over-sold, which was a
warning/alert to those holding short positions. You had the opportunity to
cover.
You also had the opportunity to switch out of the Energy and Basic Materials
sectors when they were strong and I was recommending selling into strength.
Exxon for instance was one I repeatedly discussed as a candidate to sell in the
94-95 level and buy in the 70’s. You had that chance in April and again in May.
