The Energy Sector Is Losing Momentum — And I’m Getting Out Before It’s Too Late…
At the beginning of the year, we went practically “all in” on the energy sector over at my premium service, Maximum Profit.
It made perfect sense. After all, what you have a proven system at your disposal — one that’s specifically designed to identify “what’s working” in the market… and it keeps spitting out energy name after energy name, you better pay attention.
Even outside of my premium service, I’ve written about several ways investors can profit from the momentum in oil & gas. I hope you took advantage, more than a few of those ideas went on to make some nice gains in a very short amount of time.
But as I warned readers time and time again, energy is a boom-and-bust business. For example, a couple of weeks ago, I said: “Right now, we’re enjoying the boom part of it (energy stocks). But rest assured, the bust will happen and that’s when our mettle will be tested.”
Well, that day has come. On Friday, June 17th we sold everything we held in the Maximum Profit portfolio…
Yup, that’s right. We sold all of our holdings and ran for the hills, more or less.
But we didn’t do this in a panic. I knew this day might come — and we had a plan in place. And that’s why we had strict sell signals in place for each one of our trades.
Here’s what happened…
The Energy Sector Takes A Turn…
From June 9th to June 16th the S&P 500 quickly shed 10%. And nothing was spared, including energy stocks.
I wasn’t about to let our profits evaporate into thin air. Here’s part of what I said in a special alert to my premium subscribers:
I don’t know if this is the start of a broader meltdown in energy stocks, but I do know that our our stops have been triggered in all but one holding, Equinor (NYSE: EQNR). But even that one is hovering right around that stop loss order of $33.15. But considering the broader sector environment, I’d recommend booking our gains on that trade as well.
That will put us 100% in cash.
We didn’t walk away completely unscathed. However, since we tightened up our stop losses our damage was relatively limited. The average loss was 10%, which considering the broader market, isn’t bad.
For reference, the Dow Jones Industrial Average is down 16% on the year as I write this. That’s followed by the S&P 500’s 21% loss, and a roughly 30% tumble for the Nasdaq.
On the positive side of the ledger, we were able to pick up some descent double-digit gains from names like Chevron (CVX), Devon Energy (DVN), Occidental Petroleum (OXY) and Equinor (EQNR).
But as I repeatedly warned… when the energy sector falls apart, it does so quickly. We don’t want to be in a position where we ride the sector all the way down. Just look at the five-day performance of the energy sector during this period compared to all others…
And here’s the one-month performance…
Although one month — and certainly not five days — do not necessarily make a trend, it is still cause for concern. On the year, the energy sector still leads by a wide margin (up 37% while every other sector is deep in the red). But as I just showed you — and what we witnessed last week — conditions are quickly deteriorating.
That’s why I think we’re better off getting out now and waiting until the dust settles.
I don’t know if we’ve reached the end of the road with the oil & gas trade. But for the moment, the positive momentum is fading. The sector is behaving just as wildly as the rest of the market.
But in the meantime, this is a tough market to trade in. That’s why, for the most part, I will be sitting on the sidelines until my “green light” indicator (which I most recently wrote about here) tells me that it’s safe to get back in the market.
What I want you to understand is that there is nothing wrong with booking a profit. There isn’t anything wrong with selling a modest loser before it potentially turns into a bigger loss, either. The pain can always get worse in a bear market, and it often does. Better to load up on cash now that we can use for ammo later.
There will be plenty of opportunities for new trades. Remember, there’s always another bull market lurking around the corner.
In the meantime, I recommend checking out my colleague Robert Rapier’s latest report…
Robert has a track record of generating outsized income regardless of market conditions, allowing him to extract multiple payments from the same stock over and over again, whether the broader market is going up, down or sideways.
By arming yourself with his money-making system during the bear market, you’ll not only survive…you’ll also thrive.