Reviewing Previous Routs in Oil

Let’s all agree that CLR represents the oil trade, as it pertains to both quality and risk, as they have operations domiciled in the reviled region of the Bakken shale. The question we have to ask ourselves is “how long with this correction in crude last and how low can these stocks go?” Our only guide is history, gentlemen. It’s all a guess. But at least with history, we can get an idea of where that rubber band of human emotion breaks.

Here are some of the more frightful one month drops in CLR, since 2008, and the returns in following two months afterwards.

Jan 2010: -11.4%, Feb: +3.95%, March: +7.75%
Feb 2009: -23%, March: +33.3%, April: +10.2%
April 2013: -8%, May: +1.5%, June: +6.1%
May 2012: -18%, June: -8.5%, July: -3.9%
July 2008: -17.6%, August: -12.2%, Sept: -22%
August 2010: -10.9%, Sept: +14.4%, Oct: +2.5%
August 2011: -18.5%, Sept: -13.4%, Oct: +25.3%
Sept 2014: -17.5%, Oct: -7.5%?, Nov: ?
Nov 2008: -39%, Dec: +5.9%, Jan 2009: -0.1%

As you can see, these sort of declines are not unique, but rather par for the course. I am going out on a limb here and saying 2008 type losses are out of the question. But that does’t mean we are done going lower. Every time we slid more than 15% in a given month, the following month was horrendous, sans Feb of 2009.

During May of 2012, we slid about 30% from May through July.

During August of 2011, we slid 31% before spring boarding 25% higher.

Right now, CLR is down 25% over the past two months. If I was a betting man, I’d say there is 5% down, 25% up in the name–good odds from my vantage point.

I will be averaging down if we leg down again.