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Three Stocks Crude Oil Could Make or Break


All are on the uptrend, but black gold could be in trouble.

Over the past few months, crude oil has been the talk of the town and its volatility has kept many investors on their toes. But could the valuable commodity be in trouble, or is volatility playing its game?

On July 29, crude oil took its biggest hit over the past 3 months, dipping by 5.9% to $63.26/barrel on the New York Mercantile Exchange as investors became wary of the health of the economy. Most notably, the Commerce Department reported that US durable-goods orders dropped by 2.5% from the previous month, indicating that businesses and consumers around the globe are still in save mode and reluctant to make big-ticket expenditures.

The microeconomic pressures of supply and demand are also unfavorable for black gold. A report by the Energy Department suggested that stockpiles have surged 5.15 million barrels to 347.8 million in the third week of July. This increase in stockpiles left inventory of crude 9.5% higher than the 5-year average for the period. Supply for crude oil is just outpacing demand and will keep prices suppressed.

The only ways that crude oil could see a surge are through speculation, a major natural disaster, a complete global economic recovery, or an increase in consumer spending. As for now, these don't seem too promising.

Some equities that are in an uptrend that will be influenced by the fate of black gold are the following:

1. United States Oil Fund (USO), which is up 56% after witnessing a February low of $22.86 to close at $35.76 on July 28;

2. The iShares DJ US Oil & Gas ETF (IEO), closing at $44.45 on July 28, a jump of 52% from a March low of $29.40; and

3. Barclays iPath GS Crude Oil ETN (OIL) has rebounded nicely from its February low of $14.64 to close at $23.56 on July 28, an increase of 61%.

When dealing with crude oil, volatility and risk are 2 things that all investors must consider. A good way to help mitigate the effects of both is by having a sound exit strategy. According to the most recent data from, the price levels at which the uptrend of these indexes would be in trouble are: USO at $34.26; IEO at $42.11; OIL at $22.54. Keep in mind that these trigger signals change on a daily basis as the markets fluctuate.

Hoofy & Boo take a clear look at an often slippery subject:
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No positions in stocks mentioned.
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