Oil refiners including Valero Energy and Tesoro helped lead the
market's rebound today as traders continue to buy into the
VLO climbed 1.32 percent to $20.74 in afternoon trading and TSO
climbed 0.46 percent to $13.19. Both fought their way back from 4
percent declines early in the session.
The activity follows call buying in TSO on Monday and bullish
options trading in VLO throughout April.
As I wrote last week, the refining sector has been regaining its
footing this year after an abysmal 2009. Not only have the charts
showed signs of bottoming, but also the fundamentals are improving
after these companies cut productive capacity and as the economy
recovers. For instance, the data showed strong factory orders and
home sales yesterday, even though it was ignored amid the broad
Today, the Institute for Supply Management said its
non-manufacturing index remained at 55.4 percent in April. While
the number was below economist forecasts, any reading above 50
still indicates the economy is expanding.
Similar strength has occurred in the gold-mining sector since I
wrote about it on April 28. While it can be argued that gold stocks
are merely following gold prices higher, something more important
may be underway: In the first quarter, the Market Vectors Gold
Miners ETF (
) fell 4 percent while physical gold edged higher by about 2
percent. Since then, GDX has done twice as well. It appears the
share prices are still relatively undervalued relative to bullion
and may continue to gain favor.
I am flagging these calls not to boast about being right, but
because all of us should recognize when we nail it and can't hit
the side of a barn. Traders are wrong all the time -- especially
me. The most important thing is sticking with the trades where your
judgment works, and staying away from areas where you can't get it
I am long VLO and GDX.
(Chart courtesy of tradeMONSTER)