Oil Continues Its Rise

If you take a look at the United States Oil Fund LP ETF (USO) chart below, you'll see a bullish picture of a security moving up through resistance on strong volume.

click to enlarge

The USO gapped higher on Friday, and volume was stronger than it had been in months (see graph above). On Monday, it followed through on that strength, and moved further above its 50-day average.

The ETF looks to have formed a triple bottom near the $68.50 level, which it successfully tested again last week. This looks like a bullish breakout, although it would need to eventually go to a new high on this move to avoid another type of bearish pattern from developing - the head & shoulders top.

I am not long oil right now, at least not directly. But I do have exposure to the energy sector via the oil services ETF (IEZ), as well as some alternative energy plays that benefit from higher oil.

Take a look at the PowerShares Clean Energy ETF (PBW), and you'll see that it surged +3.59% higher on Monday. This one has come down a lot, and if oil stays strong it should continue to enjoy a relief rally.

Some of the individual solar stocks had outstanding days. For example, both First Solar (FSLR) and SunPower (SPWR) both spiked roughly +10% Monday alone. Nice moves. FSLR reports earnings this week, and a good report would propel both of these names even higher.

The agriculture names also fared well on Monday, and have held up much better than many other areas during the recent market weakness. Another group is this category is probably the global materials stocks. I sold our ETF in this area recently, but a relief rally would not be surprising.

Disclosure: The author is long IEZ, PBW, and SPWR.

Comments

[Serge:]

Wow, you are so spot-on with your technical analysis. It's a shame that it's all bullshit. Why did the price of oil rise? Because of comments by OPEC about $80 being a floor for oil.

2008 Feb 12 10:28 AM

[Jake2:]

Lose the expletive, Serge. We're all gentlemen here.

2008 Feb 13 03:38 PM