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Oil Prices Ready to Launch: "Hugger" Style

Stephen Stewart
www.fatpitches.com/
June 29th, 2006 There are a lot of opinions on what the price of oil will do. The fundamental crowd can build a good case for either scenario - stable, lower or higher prices. However, it is our experience that the right opinion is the opinion of market participants. So what are they saying? The only way to know is do a study of prices. Lets not waste any time and look at the charts to get the proper perspective.

This chart of oil tells us that oil prices have consolidated and are ready to move up. This is indicated by the red arrows showing that the stochastic's have come from an oversold position and now are moving up rapidly forecasting rising prices. A breakout in prices with a close above $72.00 will bring in the oil speculators and push prices higher and launch us into what we call "Hugger" mode. What is "Hugger" mode? It is where prices are rising fast and the 9-day exponential moving avg. is climbing at a 45 + degree angle and that moving average acts as support on the way up.

Why do we think speculators will jump in a move prices higher? At the bottom of the oil chart is the price of oil vs. the S&P 500 in terms of performance. Hedge Fund managers are speculators and need performance. History has proven they will chase any asset class that is outperforming the general market.

The sweet spot of rising energy prices will be in the energy services group.

We are coming off a bottom in the oil services index. Time to get long with the rise in oil prices to new highs in the days ahead of us.

Stephen Stewart
www.FatPitches.com