This is going to sound like a very strange thing to say…
But I’m hoping a catalyst for certain stocks on my watchlist fizzles out.
What??
I’m talking about oil and gas names, and I said what I said because they have been on a tear lately, all due to the most recent events in the Middle East.
Things started heating up again after the assassination of Hamas leader Ismail Haniyeh in late July.
Oil and gas prices followed suit. This is the Barron’s headline from yesterday.
Barron’s Oil Headline; Barron’s
No one with a soul wants to see this situation escalate any further. It’s deadly and tragic. If you remember, tensions came to a head back in April, and here we are again.
However, as I said in my Market Minutes video on Monday, we can’t ignore the energy sector’s reaction.
This presents us with some immediate trading opportunities even if the current geopolitical situation has a positive outcome, and I sincerely hope it does.
First, what defines an oil or gas stock?
If you’re unfamiliar with the sector, oil and gas stocks are companies that extract, transport, or distribute oil products.
This ranges from offshore or inland drilling to distributing everyday products like plastics and gasoline. It’s a vast and complex industry heavily influenced by geopolitics.
And with that geopolitical influence comes volatility…
How the latest news in the Middle East is shaking up oil and gas stocks:
Let’s talk about why events in the Middle East cause ripples across the global markets and have such a massive impact on the oil and gas sector, in particular.
The Middle East is home to some of the world’s largest oil reserves, with countries like Saudi Arabia, Iraq, and Iran playing key roles in global energy production.
So when tensions flare up in this region, as they have very recently, it’s like throwing a wrench into the gears of the global oil supply chain.
Even the hint of instability can send oil prices soaring because traders and investors immediately start worrying about potential disruptions to the supply of crude oil.
The stocks affiliated with oil prices are extremely sensitive to catalysts like this.
The immediate impact: price spikes and volatility:
We’ve seen this play out time and time again, and it’s no different now. The conflict has led to a surge in oil prices as markets react to the uncertainty.
This is what the United States Brent Crude Oil Fund (NYSE: BNO) looked like through Monday:
Brent Crude 5-Day, 5-Minute Candles Chart; SteadyTrade
But when oil prices jump, it can be a double-edged sword…
On one hand, higher prices can mean bigger profits for companies involved in exploration, production, and refining.
But on the other hand, the volatility and unpredictability can make the market a bit of a minefield, especially for those who aren’t prepared.
Because preparation is of utmost importance for trading names like these, or any volatile stocks, I urge you to join my Daily Income Trader service.
Subscribers get access to my two daily webinars, Premarket Prep, and Daily Double Down, plus others, our Oracle trading tool, training videos, watchlists, and much more.
Should you trade oil stocks amid the latest run-up?
I have the perfect answer…
It depends.
Many big oil names are too expensive for traders with small accounts.
Exxon Mobil Corp. (NYSE: XOM) has surely benefited, but its stock trades in the $100s.
XOM 5-Day, 5-Minute Candles Chart; SteadyTrade
But if you can afford it, great.
Also, remember to get in on the price action of the big, expensive names, options are always….well, an option!
If you think you’re ready to trade options and want to learn more, you should subscribe to our IRIS program.
As part of the program, we provide options training, trade ideas, and everything else you need so you can feel comfortable doing it on your own.
Learn more about our proprietary IRIS tool here.
And if you want to trade oil and gas stocks but have a small trading account, fortunately, I keep my own watchlist of smaller, more affordable names that are accessible to everyone.
One of several that I presented on Monday during my Market Minutes was Indonesia Energy Corp Ltd (NYSE: INDO).
INDO 5-Day, 5-Minute Candle Chart; SteadyTrade
INDO has been enjoying the oil surge just like XOM but for a price that’s much easier on the wallet.
So, is it a good time to trade oil stocks?
It all depends on your risk tolerance and trading style. Always remember how volatile this sector can be.
And that goes double for penny stock names like INDO. You have to be careful and have a solid plan in place.
That’s why, in light of recent events, I’m closely monitoring this sector and maintaining a lengthy watchlist of oil and gas stocks.
These names are in play right now, even if the latest developments in the Middle East turn out to be a non-event, and I really hope they are.
And I’ll continue to share them with my Daily Income Trader and StockstoTrade Advisory subscribers!
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade
P.S.
If you’re considering adding options trading to your playbook, you should check out our presentation this Thursday, August 15th, at 8 p.m. Eastern.
My colleague and seasoned options trader, Jeff Zaniniri, has developed an AI-powered algorithm called GAMMA that exploits a market inefficiency, or glitch, within certain options contracts.
These glitches trigger alerts in the system, which Jeff will share with his GAMMA subscribers every Monday, Wednesday, and Friday.
He’ll give you all the details during Thursday’s live presentation, but you have to be there.
Register for the 24-Hour Glitch today!