This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Oil Price Decline Creates Stock Opportunity

NEW YORK ( TheStreet) -- The crude oil market is taking a long overdue rest. Prices have dropped more than 6% in the last few days, with oil now trading at less than $107 a barrel.

Does this represent the beginning of the end of this monster trade? Or is it just a brief pause in a relentless upswing? I'm betting strongly on the latter and looking to scoop up some oil stocks as their prices fall into a value zone.

Three events have combined in the last days to cause oil prices to drop precipitously.

First, there was talk of a peace deal in Libya that Moammar Gadhafi had preliminarily accepted. It's hoped that this would restore some of the 1.4 million-barrel Libyan oil supply that has been lost.

Second, the revised rating of the Fukushima Dai-ichi nuclear accident from a level 5 to a level 7 (i.e., "Chernobyl-like") event has spooked investors.

Lastly -- and probably most damaging to oil prices -- the Goldman commodity group in London issued a note advising clients to take profits on their oil positions, at least in the short term.

We can think about the money that has entered the oil trade in a two-tiered way.

There is the long-term money: those investors and new commercial entrants who have decided they can no longer afford to ignore oil either for the sake of their portfolios or because of the increasing risk of higher prices to their businesses.

Then there is the short-term money: the hedge funds and individual investors and other "fast" players who can afford to get in and out of the oil trade and do it at a moment's notice, trying to catch the momentum and lock in short-term wins. It is the "fast," short-term money, that has temporarily moved out of oil because of the three events I mentioned.

The oil stocks have gone with them. The energy sector, long the leader in this move upward in the stock market, has clearly set some interim highs and has begun to roll over in the short run.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
APC $52.76 -0.83%
APA $54.40 -1.86%
XOM $88.40 0.42%
AAPL $93.74 -1.15%
FB $117.58 0.73%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs