Oil Tops $63: Continuing Profits for Small E&P Stocks

So I heard a radio ad this morning from a mortgage company. It might have been PNC, but don’t hold me to it. It was typical mortgage ad fodder: rates are as low as they will go, the housing market is heating up, prices will rise, oil is headed to $80 a barrel this summer… 
Yeah, I did a double-take, too. What’s a mortgage company doing discussing oil prices? And more importantly, where are they getting their numbers from? 
*****When oil topped $60 last week and backed off, many in the financial media started the "oil’s headed lower" drumbeat. Just yesterday, there was a Bloomberg article reporting that traders have loaded up on out-of-the-money put options on oil in expectation of a drop in prices. 
I guess they hadn’t heard this mortgage ad yet. 
But seriously, oil and economic recovery are one and the same. If you believe that the economy is recovering, then oil at $60 – or $80 – makes sense. And right now, investors are speaking pretty clearly about their expectations for the economy – oil quickly reversed that drop below $60 to post a new short-term high at $63. 
*****The top-performing oil and gas stock in the SmallCapInvestor PRO portfolio is a domestic oil company with 25 million barrels in the ground. The company is pumping about 5 thousand barrels a day right now. At $60 a barrel, that’s $109 million in revenue. And the market cap for this stock is just $249 million. 
This stock currently trades just below $6 a share, and SmallCapInvestor PRO members are up 134% since I first brought it to them less than 2 months ago. But I think it’s headed for at least $10 (the 52-week high is $17.67). You can still make over $4 a share in gains (or more) and get positioned for the next big winner from SmallCapInvestor PRO. We’ve posted 11 winners out of 12 recommendations so far this year. Click HERE for details. 
*****I’m not sure how I managed to do it, but I’ve completely overlooked TradeMaster Daily Stock Alerts technical analyst Jason CIimpl for a Newsletter Advisors Wednesday spotlight. Today, I rectify that. Please enjoy the following interview with Jason, and thanks to the reader who alerted me of my oversight…
 
 This week’s NewsletterAdvisors.com Weekly features Jason Cimpl, my protégé with TradeMaster Daily Stock Alerts
Jason Cimpl is the lead equities research and technical analyst for TradeMaster Daily Stock Alerts. Together, he and I work hand-in-hand on the trading strategies and profitable recommendations that traders are currently enjoying. As Jason will tell you, the service is not day trading, but it’s not long term buy and hold either. We’re looking for short term momentum opportunities on stocks as they go up and down. Jason’s been finding quite a few recently and I wanted to take some time to dig deeper and share with you how he finds profitable trading opportunities. 
1. You and I have been working closely for a while now on the recommendations for TradeMaster Daily Stock Alerts. Can you briefly explain what you look for when recommending stocks and ETFs for subscribers to take positions in? 
It completely depends on the type of trade we are making. Lately, most of our trades have been intended to capitalize on short term investor sentiment. 
These trades are usually only good for one week, possibly two (weeks). First we try to figure out the direction of the market. Once we believe we know where the market is heading we pick stocks from the indices that correlate strongly to the market’s direction. Financials have been one such industry lately that moves strongly in the direction of the market. 
After we pick an industry we take a look at individual stocks that look attractive. If we cannot find individual stocks, then we put our money into an ETF to take advantage of the short term move. Lately we have been becoming more bearish on the market, so we have limited our trading from the long side. 
2. We’ve seen a run-up in stocks since March 9 with no real positive fundamentals behind it. I mean, housing data, consumer confidence, unemployment…all the numbers are still pretty bad. What’s going on? 
Although the economic situation is atrocious, it may be not quite as bad as some people expected. I think we are seeing two things driving the market right now. 
The first reason is the government stepped in significantly. They have taken bankruptcy off the table for the banks. This gave investors confidence to invest in the market. 
And second, this confidence caused the public to take on more risk. More risk lead to the buying of equity holdings as well as corporate debt. As risk appetite increased, so did the price of the stocks. This rise in price led the shorts to quickly cover their positions. Thus, prices continued to go up. This cycle has lasted for almost three months.  
3. A couple weeks ago you did a great charting video on Fushi Copperweld
(Nasdaq:FSIN) and showed where Fushi was pretty much flat for this year then started to take off. How’s it doing now, where do you see Fushi heading, and where can readers check out the video and get the background information? 
If you are a long term investor and have a moderate risk profile, Fushi is a great stock to invest. We usually will only hold a position for a month or two, at most, so we are looking for an exit on shares of Fushi right now. 
So far the trade is working out exactly as we had hoped. We told investor to buy FSIN below $7 and look for shares to reach $9 within a few weeks. So far shares have reached $8.50. 
Investors can access the video by going to the home page at www.TradeMasterStocks.com, there’s a link to the video near the middle of the page or just click the chart image. 
4. In TradeMaster Daily Stock Alerts you’re calling for the next 30 days to be bullish, followed by a bearish 90 day trend and a bearish 18 month trend. Can you explain this? 
The market is still strong. Despite a few high volume sell days, stocks continue to have an upward bias. This trend is certainly slowing down, but we do not think it is over. In the next few weeks, we suspect the market will attempt to make a new high. 
After the market reaches a new high we believe it will fall dramatically. Our targets are the low 800’s on the SPX by the end of June.  
5. Over the next several months to a year, what sectors do you see as having the most promise for investors? 
Energy and technology will continue to offer investors the best reward. Look for companies with clean balance sheets in the small cap space for the biggest returns in 2009. Also, pay closer attention to revenue growth. Net income is an easy number to manipulate. Right now, companies are cutting costs, which is causing net income to rise. 
This strategy cannot be kept for long. At some point demand for the services or products must grow. Costs cannot be cut forever. Without growth in revenue companies will not survive 2009. 
If you want find out more about TradeMaster be sure to check out Jason’s latest on http://www.TradeMasterStocks.com.
Published by Wyatt Investment Research at