Gas and Oil Diverge - What it Means for your Trading
Posted on February 13, 2009 by Adam
Over the past month and a half, we’ve seen a really interesting divergence between gasoline and crude oil. The price of gasoline has outpaced oil by quite a bit, setting up a bullish situation for oil refining companies. In short, they can buy oil for cheaper, refine it, and then sell gasoline at higher prices. Their profits will reflect it, and so will their stock prices.
Take a look at this chart. The red and white candles are UGA, the ETF that tracks gasoline prices. The blue candles are USO, the ETF that tracks oil prices.
Look at how gasoline prices have outperformed oil prices
All in all, this is extremely bullish for refiners, and I don’t think the trend is over just yet.
You can capitalize on this by buying stocks like VLO, TSO, HES, SUN, XOM, among plenty of others. You can use finviz for a list of refiner symbols and charts.
I still like technology too, as we’ve continued to see relative strength in the Nasdaq.
Happy Trading!
Be on the lookout for an extended pullback.
Comments (2)
Gas and Crude Oil: A follow up | Pimp My Trade
February 15th, 2009 at 10:56 pm
[...] you read my post last week suggesting that refiners are looking good from a technical perspecitve, I talked about how gasoline is getting more expensive relative to crude [...]
Trade Ideas for the Week | Pimp My Trade
February 16th, 2009 at 11:24 pm
[...] the start of the trading week, I was going through some charts to look for setups. Last week we saw a lot of strength among the refiners and technology. We saw weakness in the REITs, and the rest was [...]
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