Wednesday, July 29, 2015

Time for the bottom in Oil?

From 1 year ago,
Keppel Corp has fallen from 11.1 to 7.95, which is a 28% decline.
Semb Corp has fallen from 5.48 to 3.77, which is a 31% decline.
At the same time, WTI has fallen from $102 to just $47.50 a barrel.

It seems that both KepCorp and SembCorp has been trading as equity proxies for crude oil itself.

If oil goes down further, will both of these counters drop even more?
If the stock market suddenly fall, will both of these counters drop even more?

Personally, I think that we are seeing the final gasps for an oil bottom. I've been watching the bounce and recovery for a while and I believe that we have all the 3 things needed for an oil bottom. Rig declines has decelerated, there is general fear in the oil market (smell of the headlines plus net positioning of traders) and I feel that the USD has topped out. This makes me believe that we will be forming a higher low in oil and that we signal to me that oil has really bottomed out.

It's funny how I've been waiting for so many other cycles to bottom out and recover, but it seems the oil crash and recovery has just leapfrogged ahead of all the rest.

Because of this rationale that oil price is at a very cheap price now, I feel very tempted to buy into "oil proxies" and benefit from the recovery of oil.

However, the main thing that is concerning me is with regards to the bigger picture. I don't need to pull out any fancy certs to point of that many stock indices are making lower highs. If we truly are in a bear market in the near future, then I see no reprieve even for oil stocks as selling will be happening across all industries and sectors. It would be foolish to buy now since I would be able to pick them up cheaper in the future.

The fact of the matter is that I find both Keppel and SembCorp to be cheap at these prices, so I do think that I will pick up a lot or few of them in the very near future around these prices. Perhaps I should also be looking into other counters from this sector too.

If oil prices fall, be it from continued pressure on oil prices or a global stock rout, what will I do?

Talk is cheap, very very cheap these days. Buy low sell high? Or buy high and then panic sell? Or sit like a statue and wait for the bottom? I scoff at the idea that someone can accurate pinpoint the bottom and massively load up all their positions at that price (or the top and sell out, for that matter). I'm perfectly fine not being able to buy at the absolute bottom. A good deal is still a good deal for me.

I'm going to buy even more if we head even lower. If I loved it at this price, won't I love it even more if it gets cheaper?

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