Oil - Buy The Dip? Or Sell The Rip?
The relentless rally in crude oil WTI has finally come to an end. After topping out at $67.98 on March 8th oil hit a low of $57.25 on Tuesday marking a 15% correction from its high.
It was an incredible run with prices more than doubling from the November lows. The 20-day exponential moving average provided impressive "buy the dip" opportunities (see below chart) but it all came to an end on March 18th when oil closed below for the first time since November 6th.
On Tuesday oil got hit for another big sell-off losing more than 6% on the day. However, the slide was short-lived with news of a massive container ship blocking the Suez canal causing a 5% snap-back rally.
Is this a "buy the dip" or "sell the rip" moment? Will the 20-day exponential moving average which provided support for nearly five months now become resistance?
Pullbacks in uptrends provide some of my favorite trading opportunities. I've been stalking oil and the related stocks for weeks patiently waiting for a deeper correction, and finally, it's here.
But, I don't blindly buy "the dip" and prefer to see prices stabilize before looking to enter.
There was a nice pop on Wednesday in oil and the related stocks on the Suez canal news but it remains to be seen if this rally has legs.
For now, I'll continue to be patient and wait until the selling is behind us before stepping in and buying some of my go-to names in oil and gas.
The Bigger The Base, The Higher In Space 🚀 - Toyota Motor Corp (TM)
Buying breakouts can have varied results but when they occur from multi-year bases the potential upside can be well worth the risk.
Toyota Motor Corp has broken out to all-time highs after failing to hold onto new highs after several attempts over the last six years.
As long as Toyota Motors can trade above $140 the breakout will continue to be valid.
Many of the hot/momentum stocks in ESG/Solar/Electric Vehicles from a few months ago continue to get sold and many names are down more than 50%.
I'm seeing a lot of people "averaging down" in these stocks but the reality is many will never get back to the highs they were trading at just a few weeks ago.
Not all stocks are created equal and in market corrections, many names will outperform on the way back up but even more will underperform by a wide margin.
Averaging down in quality names or index funds can work well depending on the situation but adding to your losers could cause severe damage to your portfolio if you're not careful.
Here's what billionaire trading legend Paul Tudor Jones thinks about averaging down...
Something else to keep in mind if you're thinking about not following your stops, the percent move you will need to get back to break-even...
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