Everybody is talking about oil and a potential double-top after the commodity failed to break through $55 a barrel in yesterday’s trading. Nobody can really predict these short-term movements, and enough people look at charts that we might not see $60 near-term. Even if we get a pullback in oil prices on technical trading, I doubt that is the end of high oil prices. Any meaningful pullback should be bought as far as the energy stocks are concerned, just as a run above $55 presents a good opportunity to take some profit off the table.
High oil prices are here to stay, contrary to many people who blame the current escalated priced to hedge fund trader speculation. We might not see a run to $60 this week or next, but I would not be surprised if we saw oil hit $60 before it drops to $40 per barrel. When picking stocks in the group, focus on those companies that not only do well with prices high, but will have strong production growth as well, so when prices do give back some ground, their earnings won’t collapse.