Monday, February 11, 2008

Oil Heads Higher For Second Day

Take a look at the oil ETF (USO) chart, and you'll see a bullish picture of a security moving up through resistance on strong volume.

The USO gapped higher on Friday, and volume was stronger than it has been in months (see graph above). Today, it followed through on that strength, and moved further above its 50-day average.

The ETF looks to have formed a triple bottom near the $68.50 level, which it successfully tested again last week. This looks like a bullish breakout, although it would need to eventually go to a new high on this move to avoid another type of bearish pattern from developing - the head & shoulders top.

I am not long oil right now, at least not directly. But I do have expsure to the energy sector via the oil services ETF (IEZ), as well as some alternative energy plays that benefit from higher oil.

Take a look at the PowerShares Clean Energy ETF (PBW), and you'll see that it surged +3.59% higher today. This one has come down a lot, and if oil stays strong it should continue to enjoy a relief rally.

Some of the individual solar stocks had outstanding days. For example, both First Solar (FSLR) and SunPower (SPWR) both spiked roughly +10% today alone. Nice moves. FSLR reports earnings this week, and a good report would propel both of these names even higher.

The agriculture names fared well today also, and have pretty much held up better than many other areas during the recent market weakness. Another group is probably the global materials stocks. I sold our ETF in this area recently, but a relief rally would not be surprising.



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