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March 23, 2022
Here we go again…
Days after oil dropped from a high of $130.50, prices are rebounding.
Last checked, oil was up another $3 a barrel to $112.10. All thanks to tighter global supply, with Russian output impacted by sanctions. Plus, the American Petroleum Institute just said crude stocks fell by 4.3 million barrels for the week ended March 18, according to Reuters.
Unfortunately, oil prices could he headed even higher, near-term. “We’ve got summer vacations. The travel industry is anticipating that airline activity will be higher because there’s a lot of pent-up demand from the pandemic. And this is when gas prices typically are higher anyway,” said Regina Mayor, global head of energy at KPMG, as quoted by Yahoo Finance.
So, how do we trade the ramp up in oil prices?
One way is to trade dividend-paying oil stocks, like Exxon Mobil (XOM).
At the moment, XOM carries a dividend yield of 4.3%. Also, after pulling back from about $90 to $77.71, the stock has started to pivot higher again. Should oil prices continue to gush higher, we’d like to see XOM test $90 again shortly.
Another way to trade higher oil prices is with an ETF, such as the SPDR Energy Select Sector ETF (XLE), which provides exposure to companies in the oil, gas and consumable fuel, energy equipment and services industries, as noted by State Street SPDR. Not only does an ETF allow for diversification, you can buy it for less.
The Dow is down 117 points to 34,592
The S&P 500 is down about 20 points to 4,485.50
The NASDAQ is down 101 points to 14,553
Gold prices are up about $10 to $1,929.54
Bitcoin is down about 2% to $42,002.73
Oil prices are up $2.55 to $111.80
The VIX is up slightly to 23.86
Trade Idea of the Day
Lithium prices aren’t slowing – at least, not any time soon.
As OilPrice.com reported, “Lithium prices have nearly doubled in 2022 amid [an] insane commodity rally.” And that’s after those same lithium prices nearly quadrupled in 2021,” adding that, “lithium producers have been caught flat-footed again, ill-prepared to meet the current even stronger demand surge fueled by the global energy transition and EV revolution.”
If you think lithium prices are coming down soon, don’t count on it.
That’s why lithium stocks, like Lithium Americas (LAC) have been explosive.
Over the last few days, LAC is up about $5 on growing demand. It’s also up on news it’s nearing production at its Thacker Pass lithium facility. Nowadays, if the LAC stock can break above prior resistance around $34 a share, the stock could test $36 next.
So definitely keep an eye on that.
Trading Education 101: Support and Resistance
For those of you that are new to trading, or even technical analysis, we wanted to start adding education to these daily e-mails. In fact, if there’s a topic you’d like for us to cover, please let us know – and we’ll be happy to share it here.
Above, we mentioned support and resistance. But what does that mean?
Let’s start with support.
To find support levels, look for a series of low points when a stock continues to fall to a certain level, but then doesn’t fall any more. If it happens twice at the same level of support, we have a double bottom argument. If it happens three times, we’ve just found triple bottom support.
The more times a stock tests and holds a support line, the more reliable it becomes.
Resistance is the reverse. To find resistance, look for a series of high point. If it happens twice at the same level of resistance we have a double top argument. If it happens three times, we’ve just found triple top resistance.
Let’s look at the Lithium Americas chart again for example.
If you have any questions, comments, or anything we can help with, reach us at any time.
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