Take a look at my forecast chart for
United States Oil Fund (
, an exchange-traded fund (
) whose units' net asset value tracks the performance of the spot
price of West Texas Intermediate light.
Notice that the forecast is calling for USO to drop down into the
$33 range by this Thursday, before moving back up over $36 by the
end of the month. But I am not trading USO... not by a long-shot.
Here is why... Check out this Yahoo! Finance comparison chart
between USO and
Brigham Exploration Co (Nasdaq: BEXP)
BEXP is almost like trading a supercharged version of the USO.
Check out the ovals and how much more BEXP moved up AND down
relative to USO. If you look back over a year, this "ultra"-action
compared with USO becomes even more evident. Bottom line: BEXP has
a lot more bang for the buck. But... and this should not be
overlooked... BEXP will hit you hard with significantly bigger
losses if oil breaks to the downside.
However, my forecast charts indicate that oil should move higher.
Two weeks ago, I began telling you that oil was potentially setting
up for a great rally to start at or near the end of May. And that
is still looking to be the case. How did I know this was likely to
happen? It wasn't because of fundamentals or technicals or because
I am, somehow, clairvoyant.... No, it is simply because of the
uncannily accurate forecasting of my time-cycle technology.
While the overall market is down a little over -10% in this current
correction, many oil companies are down -20%, -30% and some even
more. Relative to the broader market, this means many of these oil
companies are significantly oversold and underpriced.
Add to this the fact that China continues to demand more and more
oil with an economy expanding at +8%. Yes, Europe is in financial
straits, but that doesn't mean it is not in need of oil, and a lot
of it. The U.S. government is shutting down or severely curtailing
oil drilling in the Gulf of Mexico and although this does not have
an immediate impact on the price of oil, it is still taking supply
out of the system, which will ultimately help drive the price of
oil higher. The higher the price of oil, the more money oil
companies make even if they do not increase their percent of profit
margin . The more money flowing into the likes of BEXP, the more
investors will like the stock, and the more demand for shares of
BEXP, the higher the price is likely to move.
Hurricane forecasters predict this year's hurricane season could be
the worst in several years. One or two hurricanes in the Gulf of
Mexico could add even more peril to a fragile supply line for oil
and gas, for that matter.
It would not surprise me to see oil hit $90 or more per barrel
sooner rather than later.
On Friday, crude oil fell just below $74 per barrel.
Here are the details on BEXP...
The first thing that should jump out at you is BEXP has not only
plummeted during the past three weeks, it has fallen so low as to
have triggered a technical "out"... This means, strictly on a
technical consideration, you should not own shares of BEXP. And the
fundamental picture isn't much better, given the fact that both
BEXP's industry (oil and gas operations) and its sector (basic
materials) are struggling.
However...and this is the key...because of the confidence I place
in my forecast models, which predict higher oil prices in June, I
believe BEXP is setting up for a potentially significant move
Action to Take -->
As an investor, you know that nothing in life is guaranteed except
death and taxes... to use an oft-referenced phrase. I am not
telling you to bet the farm on BEXP, and neither am I guaranteeing
that oil will move significantly higher in the coming month (in
fact, if that forecast proves wrong, BEXP could move much lower).
What I am telling you is that -- based on what my proprietary
forecasting models are telling me -- I am investing a significant
portion of my money into oil-related stocks, and one of my
favorites is BEXP. I have others, and I reveal these in my premium
Mastering the Markets
Editor: Mastering the Markets, Trade of the Week
Disclosure: Mike Turner does not own shares of any security
mentioned in this article.