Wednesday, April 20, 2011

Short Oil for Fast 20% Profits in April

Oil prices are about to hit the skids. A $20 drop per barrel is not just possible… it’s likely.

If you own a single oil stock, you should read my warning below. 

But if you want to profit from the coming fall in oil prices, you MUST read onour strategy will hand you fast profits of 20%.

Short Oil? Are You Crazy?
Richard Band, here, and no, I haven’t fallen off my rocker—yet!
Oil prices have already started to slide—down 5% this week
But that’s just the beginning of a significant 20% drop that will catch most speculators with their hand in the cookie jar and give YOU the opening for a fast 20% profit.
Three simple reasons why:
1. Japan’s energy demand is plunging.
The tragic earthquake and tsunami has ground Japan’s economy to a screeching halt. Given that oil accounts for 45% of the island nation’s energy needs and that it’s the second-largest importer of oil in the world, you can bet oil supplies will stack up and prices will buckle.
2. Insiders are abandoning ship.
Big Oil insiders—refiners, producers, drillers, you name it!—are selling crude futures hand over fist. Commercials are net short an astonishing 310,000 contracts right now. That’s a record—the old record for short contracts was just 200,000!
3. And supplies are piling up.
Crude inventories just surpassed their highest level since 2004. High gas prices are forcing consumers and businesses to cut back on driving, so there are now 355.7 million barrels of oil stockpiled in the U.S.—and imports are still flooding in.
Don ’t Miss This One!I could give you another half-dozen reasons why oil is due for a correction, but these are the three most important factors I see right now, and time is short for us to profit from this strange situation.
We’ve all learned that trees don’t grow to the sky, but even well-founded worries don’t add up to the more than $20 spike in oil prices in just 49 days we’ve just experienced.
Let me be clear: I’m not forecasting a return to $50 per barrel oil anytime soon. But thefear (of Middle East supply disruptions) and the greed (of speculators who want to push the price up another $30 a barrel) are giving you a fantastic opportunity to profit.
So let me show you exactly why now is the time to go short on oil.
The Proof Is in the Pudding
I’m a dyed-in-the-wool value investor who looks at fundamentals (earnings, balance sheets, cash flow, etc.) above all else. But technical indicators often give me valuable clues to short-term moves, and one indicator is screaming that a pullback in the price of oil is imminent.
I’m talking about the simple 200-day moving average.
Currently, crude oil is sitting around $108 per barrel, or more than 20% above its 200-day MA. That’s a huge gap, and it has occurred just twice in the past three years.
Both times, the price of crude fell an average of 20% within 30 days.
In July 2008, crude was sitting at $145 per barrel while it’s 200-day MA was $110. Just 30 days later, prices were down 21%.
In October 2009, crude prices were around $81 per barrel. Its 200-day MA was $62.90. Just over 30 days later, prices fell 15%.
And it’s all about to happen again. A 20% plunge in the next 30 days is inevitable.
Grab a 20% Profit When Oil Drops
Here at Profitable Investing, we’re not sitting on our hands when oil starts to fall: We’re going short!
To control our risk, we’re shorting an exchange-traded fund (ETF) that tracks the price of light, sweet crude oil.
This fund’s primary objective is to reflect any and all changes in the spot price of light, sweet crude. But for the past two years, it’s failed miserably on its mission: Crude prices have soared 124%, but this fund clocked in a meager 43% gain.
Talk about a failure to deliver!
But that’s great news for us. When oil prices plunge $20, this ETF’s shares will fall off a cliff.
n 1982, Chrysler was considered D.O.A. I looked at the numbers and said, “Chrysler is going to survive to fight another day.” Within 12 months, Chrysler shares soared 426%.
In 1998, right at the bottom of the August market panic, investors were fleeing to the hills. I pounded on the table for my Profitable Investingsubscribers to buy stocks with both hands. Our recommendations have risen as much as 500% since then.
In 2000, when everyone had a bad case of technology fever, I recommended all the unpopular investments, like REITs. We avoided a more than 90% plunge, AND we banked more than 250% in a single REIT.
In 2003, investors shunned the Midas metal. But I once again went against the crowd, recommending a single mining stock and a low-risk gold fund.Within five months, we locked in more than 50% profits.
Even in the bear market of 2008, I steered investors away from wealth-stealers like Health Management (-77%) and Tenet Healthcare (-80%).Instead, we pocketed big winners like Unibanco (102%) and Chesapeake Energy (121%).

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