Opinions
Don Vialoux
U.S. Oil Fund E.T.F.
USO-N
TOP PICK
Feb 12, 2014
Stock price when the opinion was issued
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An energy play, so the decline in this is the stumble in the price of oil. For it to rebound, you are going to have to see oil back to around $75-$80 a barrel. Doubts if you will see this until the latter half of 2016, if even then. You could be holding this for a long time. You could write covered calls, which is simply selling a call option in which you agree to sell this to somebody else at a certain price. If you are in for a protracted period of time where you don’t think the ETF is going to rebound sharply, then this is not a bad strategy because you are collecting cash flow while waiting.
His view on oil is a little different than what you are used to hearing. He would view it as a “lower for longer” phase. Looking back at timelines of commodity markets, they tend to move in long waves of boom and bust. From 2002 to 2011, the big China era, oil was doing well. After a bubble, which he thinks oil is in, you have the guillotine phase, and then it is sandpaper for 3 years. Thinks $50 is going to be about the ceiling, and will be range bound from $25 to $50. The story is not one of demand, it is one of supply. There is a lot of supply out there, so any time oil prices spike, we get regions increasing supply. He wouldn’t be Long on this.
Tracks the price of West Texas intermediate oil. Seasonal strength is from July 12 (Don said this date and then said “now”, so expect he meant Feb 12th. - Bill) to April 22 and this particular trade has worked 21 of the past 30 periods with an average return of around 9%. Chart shows the price of crude oil broke above $100 and is now in a well-established upward trend. Look for crude oil prices to move significantly higher.