Trading Oil Stocks

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In trading oil stocks and trading oil
futures traders have been keeping
tabs on the violence in Libya.

Using technical analysis with
Candlestick stock charts they gauge
evolving stock market and commodity
market sentiment.

Fundamental analysis of this situation
is fairly basic.

Political unrest in the North African oil
producer threatens the production,
refining, and export of crude oil and
its products.

For Shell and Exxon-Mobile, who
have recently reentered Libya, one
might expect the Libyan unrest to be
a threat to production but for other
producers outside of Libya a rise in oil
prices due to Libyan problems could
be profitable, at least in the short
term.

As in all such situations the news
drives the prices of stocks and
futures.

However, the fundamentals are
typically discounted very quickly.

As such it is through the use of
Candlestick analysis that stock
traders can anticipate the next
movement in stock prices and profit
accordingly in trading oil stocks.

Commodity traders as well as stock
traders will likely view the Libyan
situation as a temporary trading
opportunity in trading oil stocks as
well as oil futures.

Like the recent unrest in Egypt the
mass demonstrations may well be
resolved peacefully and may have no
effect upon oil production and export.

As such, stock market investors may
profit from short selling when prices
have been driven up by the news, if
indeed they are correct in their
believe that prices of oil and oil stocks
will settle down again.

For trading in companies doing
business in Libya, whose stocks may
be depressed by this situation, it may
present an opportunity for buying at
the bottom of a news-driven dip in
stock prices.

Again, the fundamentals tend to be
discounted by the market quite
rapidly so the best bet for profits
tends to be to watch the market with
Candlestick pattern formations.

The investor can use Candlestick
trading tactics to garner short term
profits from this unstable situation in
trading oil stocks due to the situation
in North Africa.

The flip side of trading oil stocks in
this situation is trading stocks that are
affected by high oil prices.

As oil prices jumped six percent on
the news from Libya, stocks fell and
continued to decline even as oil
prices pulled back a little.

As usual long term investing is
threatened by events that threaten
the economy over the long term.

Day trading, on the other hand, can
be profitable in both the ups and
downs of the economy.

Here we get back to the advisability
of using technical analysis tools such
as Candlestick patterns to read
market sentiment as events such as
the Libyan situation unfold.

In trading stocks or futures in
unstable situations such as that in
Libya options trading can be useful.

In trading options and buying calls or
buying puts on a stock or on a futures
contract the trader essentially buys a
little insurance with his premium.

If he expects the price of a stock to
go up he will buy calls on the stock
and if he expects it to fall he will buy
puts.

In either case he will profit in trading
oil stocks or other stocks with options
if the price moves as expected and
will only sustain the loss of the
premium paid if the price moves
contrary to his expectations.

Trading Oil Stocks

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