Here's one for the oil price bulls... tsken from Barron's... bolding is mine for emphasis.
Jim Stack of Investech Research "approach rests on a combination of technical and fundamental analysis. Technically, he is very impressed with oil’s successful retest in March of its January low. Over the last three decades, he says, there have been only five other occasions in which oil’s price dropped at least 30% during an equity bull market. In all five cases, oil’s bottoming process was short “with only a brief and generally satisfactory retest of the lows.” Oil’s price action earlier this year neatly fits that template.
Stack says that the technical picture will improve even more if oil remains above its March lows for two more months — through August. He arrived at this August threshold by analyzing oil’s bottoming process in 1998, which lasted the longest of any of the five prior oil bottoms that he studied. On that occasion, oil’s final bottom didn’t occur until five months after what initially looked like a successful retest of the lows.
The fundamental reason for being bullish on oil, according to Stack, is that global oversupply will lessen in coming months — despite OPEC’s refusal to cut back their production. Stack says that the U.S. is now acting as the swing producer in the global energy market, and drilling rig counts are down by more than half since late last year.
On the assumption that oil’s bottom is in place, Stack anticipates a big increase in oil in coming months — well in excess of the 36% increase oil has turned in since its March lows. The average 12-month gain following those five prior bottoms, he says, was 70.3%. A similarly sized increase off of this past March’s low would propel oil to $73.90 by next March.
I'd be happy with that! (Wish he gave more of a reason why the global oversupply will lessen in coming months)
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