How to Play Oil Stocks Now
Because of falling oil prices, investors have been fleeing the energy sector for months. And big name oil stocks have gotten crushed.
Major fracking companies like Continental Resources Inc. (NYSE:CLR) and Whiting Petroleum Corp. (NYSE:WLL) have dropped 51% and 58% since September. Even major oil conglomerates like Exxon Mobil Corp. (NYSE:XOM) and Chevron Corp. (NYSE:CVX) are down 10% and 15% from summer highs.
And despite strong financials and production numbers, many of these oil stocks will continue lower as prices stay down. They may be trading at discounted prices, but now is not the right time to buy back in.
“This is the time of year investors prune portfolios for tax purposes,” Moors said. “OPEC just pushed our hand a bit with its decision (or its failure to decide, depending on how you look at it) on production levels.”
“Of course, the energy sector has been weakening for several weeks with the cartel merely providing a reason for an expanded sell-off,” he continued. “As I have mentioned several times, this is now a very oversold sector. However, until the dust settles, we need to take a conservative view of moving back in.
“The overreach beyond oil has been remarkable and largely unjustified given the fundamentals involved. But emotional market swings tend to paint with very broad brushes.”
This is why Moors typically suggests investors use 30% trailing stops from a stock’s highest value. It ensures most of the losses on oil stocks are mitigated.
Moors said a bottom is developing that will allow for oversold shares to recover – and investors will want to take advantage of that. Stay tuned to Money Morning for those opportunities.
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