There's been a lot of excitement regarding the recent OPEC agreement regarding the production of crude oil, in hopes of getting prices to stabilize and rise to higher levels. However, there is a lot of money to be made, and lost if not careful, in the energy sector that is largely unrelated to the now-impotent oil cartel.
For example, back in July, our objective decision support engine (DSE) found just such an opportunity. Our DSE issued a strong buy signal for Sanchez Energy (SN) , as the stock was coming off a multimonth rally that began in early 2016 from around $2, and rose into the May high near $10. Back then, I highlighted the empirical evidence that the decline from near $10 was ending in the $4.50 to $7 zone, and that a rise that targeted the pink sell box (click on the chart link below) surrounding the $15 level should follow.
This daily bar chart is the updated version of the graphic shown in that July 16 article. In fact, the pink sell box has been achieved, and DSE has rescinded its buy signal, and has issued a sell signal.
If you compare the charts from then and now, you can see the empirical evidence is reversed. First, the stochastics that were near the 10% oversold extreme back then are now at the 90% overbought extreme. Next, the corrective, overlapping declining pattern has ended, and an impulsive thrust has taken place. Further, price is no longer down at the lower Bollinger band (purple dashed line below price bars), but up above the upper Bollinger bands. Finally, price is no longer at the neutral 200-day moving average (blue line) like it was then. Rather, it's now to a very rare extreme zone between the 4 and 5 standard deviation bands (red and purple), which control more than 99.9% of normality.
Therefore, objectively, the high-confidence buying condition of last summer has become the diametrically opposed, high-confidence selling condition. Coupled with the achievement of the target established six months ago, the only actions that are indicated by the DSE's algorithms are selling actions. So, if you are long, as we hope you've been, sell in this $14 +/-$1 zone, or place protective sell stop orders at $12 to lock in these profits. If flat, consider shorting along these same parameters. If already short, maintain exposure and/or add to your short position.
Like last July, it wasn't personal, just business. Here, too, selling SN is just business. This time, it's the profit-taking business, which is the best business in the world.