Oil is once again black gold, rising together with Australian Energy stocks. But is this an opportunity to profit or have you missed the boat?Recent excitement in the market has been about a surge in oil, which achieved US$63.57 a barrel. While you may want to understand the reason for the rise, knowing this won’t make you money and can actually mislead you into buying at the wrong time.
For example, the International Energy Agency (IEA) lifted its forecast for oil demand early last year but did it head higher as many expected? No, in fact oil was already rising strongly prior to the announcement. Oil had already peaked at around US$55.24 and fell heavily afterwards.
Another example… in March and May 2017, a rise in oil was described as a ‘big rally’, however, the chart indicated otherwise as a rally hadn’t been confirmed. These rises were actually ‘sucker’s’ rallies, which lasted for a few weeks before oil continued the decline to US$42.
So what have we learned?
Simply, it’s more important to understand the price history and where it’s headed. And this principle doesn’t just apply to oil, it works for any stock or market.
Remember, this is about the transfer of wealth from those without knowledge to those with the knowledge. So ask yourself honestly, which group am I in and where would I like to be?
While a further rise is likely for oil, the chart indicates that it will pull back soon before the next rise. So, there’ll be new opportunities to profit in 2018, when the time is right.
What do we expect in the market?
The market traded to a high of around 6,256.5 points, well within the before-mentioned zone (6,200 to 6,400 points) where the market is likely to pull back, at least temporarily.
You may have heard me say that January can be volatile and therefore expect the market to take a breather. That said, until the market indicates otherwise, it’s on track to trade to between 6,370 and 6,450 points in the first quarter.
Important times for our market this half of 2018 are mid-February/early March or late April/early May. Turns often occur in the latter period when the market has been buoyant into the New Year.
Remember, the Australian market is yet to break through the all-time high at 6,873.2 points it hit in November 2007. It is important to continue to manage risk while waiting for a further rise.
Core to trading in this volatility and understanding the market is knowledge. Both, historic and how to read the market. As said before, it’s about the transfer of wealth from those without it to those with the knowledge. That’s why we set up the Wealth Within Institute and have developed the only government accredited Diploma Course in Share Trading and Investing. Which group do you want to be in…
Dale Gillham Chief Analyst at Wealth Within www.wealthwithin.com.au
