The Seasonal Trends Are Strong With Oil

While cavorting on the Twitter last night, amidst the savages, I posted this seasonal graph of oil/gas exploration stocks, lifted from the second iteration of The PPT, Exodus.

If you’re wondering what some of these names did in 2008, when the lot of you were hoping to get hit by automobiles and die, instead of having to endure the agony of the market each and every day, I bring forth data!

2008 returns (Feb, March, April)

CXO +15.5%, +10.04%, +7.5%

CLR +12.7%, +13.5%, +34.8%

HP +14.1%, +4.5%, +14.5%

This story seems to repeat itself each and every year. Following a nice week of oil gains, most analysts and ‘exBERT’ pundits have soured on crude. Not me.

I shall hold onto shares of SLCA, FMSA, DVN, OXY and PACD until I am rich with profits, bathing in the blood of the very people who commit grave market sins. Those people, all of them, shall be punished in my fires of retribution.

In all actuality, being down a hundred after the melt up we had isn’t such a horrible thing. But it’s the manner in which we declined, post bullshit “good news” futures melt up. I hate it.

This market is a widow-maker, destroyer of capital, bastard of bastards. The one ace in the hole, oil to zero, has completely turned on a dime and now is the single best place to put one’s money. Fuck me running sideways. But I’m not complaining, as I saw it coming and have plenty of oil longs.

But, if you look closely, each and every morning, Wall St. analysts have been downgrading oil stocks, post 65% sell off. These monsters missed the top and ate crow the whole time. Now that the sector is bouncing and crude caught a bid, they are taking this opportunity to downgrade. Puhleeze. No one knows where oil is heading, certainly not those clowns.

All in all, it was a good week. Stocks responded in the oddest of ways, despite the soviets in Greece attempting to ruin the ECB. Let’s cross our fingers and party to the Gods that next week brings us similar fortunes. Although I am reticent to believe in any form of momentum, up or down. The conditions are present for a face ripping rally though May, with the exception to individual names like GPRO and YELP who can and will ruin you via earnings shortfalls.

https://www.youtube.com/watch?v=kY1o5eL8DY4

Ooh, the jobs numbers were good; therefore, we should all margin out our accounts and throw fistfuls of cocaine at our cold callers, ordering them to smile and dial.

You know what? Fuck this market and the sick, twisted, people who trade it. You know damned well we are going to reverse and get tar and feathered today. For almost a year now this story has replayed itself over and over, luring me in like a sucker on a stick. Well, I have news for you, I’ve reached the maximum allowable limits of jadedness and will do the exact opposite of what logic dictates, hereinabove, for as long as it takes to re-establish market dominance over my peers.

I am not fooled by Mother Market and know her devilish ways.

As an aside, social media is now uninvestable. I am left with a small, legacy, position in YELP and couldn’t be more disappointed in the direction the company is taking. It’s not just YELP. This entire industry, save LNKD, FB and TWTR, is riddled with bullshit. And there is one common denominator: FREE CASH FLOW.

From herein out, I am going to focus, exclusively, on companies generating significant free cash flow. The market has matured to the point of apathy with these high growth money losers. The illusion, the facade, has been lifted and the bottom line is all that matters.

I strongly advise you to heed this words of caution and to reconfigure your holdings to preclude degenerate gambling stocks before the hammer of death strikes us all again.

Now shut the fuck up and get back inside of the garbage can.

NOTE: I hope GPRO shorts die in hell today.

I bought PACD, not for fun, but for the win.

But I love YNDX.

With some of my available cash, I started a position in YNDX. I like this until $20.

Oil is now up 6% for the session. Traders have oil barrels coming out from their ears, sending the Dow up 170.

My largest trading position is now PEIX–because ethanol isn’t made from oil. You can’t take a fucking rig to the farm and drill for corn. Farmers will shoot you for shit like that. Instead, you have to get all Frankenberry on mother nature and order those Monsanto seeds that will grow to 10 feet high without sun or water.

Moving on, I am tempted to sell all of my oil stocks–because I want to buy more. This is becoming very predictable. You know damned well that whoever is buying oil today will have their dicks chopped off tomorrow. Am I cursing a lot these days?

Good.

Biotech still looks sick. I was gonna buy some ALXN, but opted out. Airlines are down because you’re all retarded and tech is mixed. Frankly, if you’re not long a boat load of oil, you’re not doing much today.

Losers.

You know which oil stock is gonna run like a bat out from hell? FMSA. You can thank me later. I already own that shit, so I find no reason to throw more money into the flaming barrel of garbage.

This back and forth makes for a great spectator sport, shitty investable markets.

Futures are higher; cocaine parties are breaking out across Wall St. In about 1 hour from now, assholes will come into the market and sell everything, scaring the shit out of stoned out stock traders, causing fuckery on a mass scale. After we flush out, shorts will cover, sober buyers will step in, then we will trade up again.

At around 3:15pm, more news out from the ass of Europe will hit the tape, forcing everyone to rethink the very meaning of life. Shorts and sober buyers alike will sell in sync and the coked out buyers will try to catch the falling knife. The market might end little changed for the day; but the damage would’ve been done, unless of course you don’t give a shit about daily price fluctuations and played bridge all day long with your blue haired grandmother.

PFE paid a shit load of money for HSP and GPRE easily beat numbers, which bodes well for PEIX. To think that ethanol traded down in tandem with oil, when in fact it is a fucking corn based product, makes my head want to explode.

Yesterday in The PPT, in the blog section, I highlighted how super-extended the hybrid scores were and to take profits. Because of that, I was able to sell ECR above $7.10 and then swing those funds around into AAL.

This is a very simple trade, even an idiot can do it.

AAL is the most leveraged to oil going down in the airline space. Them and ALGT have the most to gain from cheaper crude. Naturally, if crude spikes, there will be weakness in the shares. Nonetheless, this is a very healthy business, with over $11 billion in quarterly revenues and nearly a billion in net profits.

Here is how Exodus is grading the airline sector now.

Even after today’s move, the sector is still trading near the bottom end of its Hybrid (combination of both fundamental and technical factors) range. AAL is still down 6% for the year, unjustly, and stand to profit most from the rout in oil.

The pair trade is this:

Long SLCA/Long AAL.

Both are heavily leveraged in their own right and possess the ability to spit out significant free cash flow.

Greece is the story this evening and futures are off. We know how this ends, with Greece blinking, bears caught in ‘fag-boxes‘, tossed idly into outerspace.

Oil reversed yesterday’s gains, sending my airline stock, AAL, through the roof. After all, they are only netting close to a billion dollars per quarter in an environment of cheap fuel and rich consumer.

“The market is supposed to go down,” said the bear. The people disagree.

The people want stocks. They buy it in their sleep. They dream of it and plan for the occasion. They build vacations around buying stocks and make sure to get in before the markets gets going again.

There isn’t going to be a giant event, one that shatters the life-force of the retail hack. Prepare for more of the same, gritty, drawn-out, range bound hell of hells, then breakout to the upside when no one expects it.

The only way to avoid the pitfalls of hades is to be long, strong, and determined to see it all through.