Week 19 Energy Trending and Performance
(Feel free to share this newsletter with anyone you think may be interested).
There is a lot of chatter on TV about how energy is poised for a jump and how the current low oil prices are not sustainable (no pun intended). One thing I have noticed is that pundits often make these predictions without providing specific timeframes of when their prediction will materialize.
I have no doubt that oil prices will rise. But I have no idea when. And I feel confident neither does anyone. All we all know is that oil prices cannot stay so low. The challenge with this is that one may take action too soon and then have to wait for the prediction to come true.
The pundit will of course come back on TV and declare victory whenever the prediction comes true. But the person who made the trade will have potentially waited an eternity for that prediction to come true. And for someone like me, who trades primarily in time bound options, that may actually mean a loss.
That is the reason I go only by the price trending and nothing else. That approach does not predict anything but takes advantage of actual price moves. Since I wait for the event to actually occur, I never take the full benefit of the move and leave money on the table because usually I am a little late. I also get out a little late as I do not know how to time the market perfectly.
Instead, I will use leveraged options to take advantage of portion of the move. But you already know my system. So, enough of chatter and let me get on with it.
Trending Heat Map
There is nothing in the above picture that tells me I should make a bullish bet. That may change of course. That is what trends are. They change. But I do not know when. And that is why I review the trending so that I can make my bets with the wind behind me.
Performance
Nothing to say here other than the energy trade has been horrible this year. Unless, of course, one shorted it. Maybe the damage is done and there is upside now. But I will wait, watch the trend reverse and then take action. Not before that.