So far, we’ve seen a 63% decline off the $104 high to about $38, which is just about at that 61.5% Fibonacci level. Some traders think that may be a bottom and that we will test it.
A 78% decline from the most recent high would take us to $24, or to $34 in the case of the post-2008 high.
So if you conclude, as I do, that oil is going to bottom somewhere between $24 and $38, here’s what you do as an investor.
When Volatile Oil Prices Fall
Energy remains a must-own. If anything, you have a chance to get in at lower prices today than last year.
So you can get started by opening some positions, but only open partial positions in case you need to average down.
So every time oil falls about $4 or so, add to your position – at $34, $30, $26, etc. – and then see if $24 is breached. Just nibble at each level.
What do you buy in this environment of volatile oil prices?
Any big name like Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), ConocoPhillips (NYSE:COP) or similar.
You can also do what I do, which is to buy the Energy Select Sector SPDR Fund (NYSEARCA:XLE) and the Market Vectors Oil Services ETF (NYSE:OIH).
This article is brought to you courtesy of Lawrence Meyers from Wyatt Investment Research.