Is it time to short Oil? Are the bears or the bulls going to be slaughtered?

Dear Subscribers,

There’s a great deal of buzz about the price of oil hitting a peak in the media and Wall Street. This week’s issue of Barron’s leads with a cover article, “Bye, Bubble? The Price of Oil May Be Peaking.”

I agree with some, but not all, of the article’s conclusions.  I think given the threats to the oil market right now, calling a top is premature.

We’re in the notorious hurricane season, Nigeria’s rebels are very active, the Israeli’s are busy practicing for an Iranian strike, and I believe the reduction of oil subsidies in places like China and India may not have the dampening impact some are predicting, either short term or long term. Look at the price of oil today; even with the announcement of a promised increase of daily production from the Saudi’s the price of oil is actually up.  

What I expect to see is a major spike in the price of oil to $150, $170 even $200 in the next few months, and at that point, I’m very inclined to insist ­­ as I have written in my invitation Gold & Energy Options Trader: $200 Oil Must Be Shorted. ­

It’s important that you become a subscriber of my Gold & Energy Options Trader. Besides the fact that we’re already racking up wonderful profits, being prepared for the spike I see ahead for oil and the pull back which could be precipitous, i.e. a sudden spike that takes oil to as high as $200 barrel would almost certainly be followed by a retracement back down to as low as $100 a barrel. I believe the new equilibrium for oil will be $110 to $120 a barrel when the feathers stop flying.

Interesting enough, I believe some of the best stocks to move into during the oil spike I expect to see will be the refiners. This sector has been crushed as the perception of lowered margins and government regulation as a result of these sky high gasoline and heating fuel prices has been in the news. A few more dollars lower on SUN and I have to jump in with either some well reasoned call options or write some put options and take in some cash or grab some shares on a further dip.

To paraphrase Betty Davis in her famous movie, All About Eve... “Buckle your seat belts; it's going to be a bumpy” several months!

Have a great trading week.

Best Wishes,

James DiGeorgia