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Sterling Weekly for the Week of December 6th, 2010
A Few Thoughts on the Price of Oil

Since the previous edition of the Sterling Weekly the Dow Jones Industrial Average rose 278.44 or approximately 2.5% to 11,362.19 The overall market continues to look positive, however as I write this week's Sterling Weekly I do have some concerns that the S&P 500 might be bumping up against an up against a trendline that may provide some short term resistance and contribute to a short term pullback. Or, we could trade right though it. Oil closed today at $89.38 per barrel, and with the price of Oil close to $90 I thought I would take a look at the chart for January's Oil futures contract and the Amex Oil Index 'XOI' and see what they are telling us.

I've inserted a 1 year chart below for the January 2011 Oil futures contract. In looking at the chart of the January 2011 Oil futures contract, it appears that price of Oil for January delivery is in the process of testing $93.31 per barrel. If the prices of Oil for January delivery closes above $93.31 per barrel, then it will have completed a "cup pattern" with a measured move to $113.17 per barrel.

January 2011 Oil future Contract

We have seen the price of Oil get close to $90 per barrel before only to fall back down below $80 per barrel, so I thought it might be wise to look and see if there might be something we could take as a confirmation of the likely hood of a movement higher in the price of Oil. So, I decided to look at the Amex Oil Index 'XOI'. I've inserted a chart on the 'XOI' below. The 'XOI' has completed a "cup & handle" pattern. This is a very bullish trading pattern that produces highly predictable measured movements. This pattern is forecasting a short term move to 1,189.98 on a closing basis; and on a slightly longer term basis a move to 1,389.50. Right about where I would expect the 'XOI' to be if the price of Oil reached $93.31 and $113.17 per barrel.

Amex Oil Index 'XOI'

Investors looking to trade this potential movement in the price of Oil the 'XOI' have several options. For those looking to trade the movement in the 'XOI', the SPDR Energy Select ETF 'XLE' closely tracks the movement in the 'XOI'. For investors looking to trade the movement in the price of Oil the US Oil Fund ETF 'USO' is designed to allow investors to participate in the oil futures market.

 

Sterling Calendars for the Week of December 6th, 2010.
Economic Calendar

Date

Est. Time Release

For

Consensus Prior
12/07 3:00pm Consumer Credit Oct. ($2.3B) $2.1B
12/08 7:00am MBA Mortgage Applications 12/03 N/A (16.5%)
12/08 10:30am Crude Inventories 12/04 N/A 1.07M
12/09 8:30am Initial Claims 12/04 430K 436K
12/09 8:30am Continuing Claims 11/27 4,250K 4,270K
12/09 10:00am Wholesale Inventories Oct. 0.8% 1.5%
12/10 8:30am Trade Balance Oct. ($44.4B) ($44.0B)
12/10 8:30am Export Prices Ex.-Ag. Nov. N/A 0.7%
12/10 8:30am Import Price Ex.-Oil Nov. N/A 0.3%
12/10 9:55am Michigan Sentiment Dec. 72.5 71.6
12/10 2:00pm Treasury Budget Nov. ($134.0B) ($120.3B)
  Misc. Calendar
Date: Comments:
12/06 Pep Boys 'PBY' announces earnings after the close. Est. $0.08
12/07 Autozone 'AZO' announce earnings before the open. Est. $3.40
12/07 Talbots 'TLB' announces earnings before the open. Est. $0.26
12/07 Vail Resorts 'MTN' announces earnings before the open. Est. ($1.10)
12/07 Casey's General Stores 'CASY' announces earnings after the close. Est. $0.77
12/09 Smithfield Foods 'SFD' announces earnings before the open. Est. $0.55
12/09 Esterline Techs 'ESL' announces earnings after the close. Est. $1.23
12/09 Green Mtn. Coffee 'GMCR' announces earnings after the close. Est. $0.20
12/09 National Semi. 'NSM' announces earnings after the close. Est. $0.32
12/10 Jackson Hewitt 'JTX' announces earnings before the open. Est. ($0.74)
  The full earnings calendar for this week can be found (here)

Prime Update:

The Prime Stock Newsletter is our daily newsletter that contains commentary on the overall market, and our single best trading idea for the day! (Both Long & Short Sale Recommendations) We select this stock through a combination of technical (charting) and fundamental (financial) analysis. The Prime Stock Newsletter provides select expanded quotation information, corporate description, select recent company news, our technical analysis of the shares and our expectations, and our options recommendation for the company.

Our most recent Performance Report is now available available (here). We are proud to report 19 of our last 20 recommendation resulted in profitable trades for an average profit of $0.53/share. This is an 95% success rate.

Archived copies of our Performance Reports can be found (here).

Highlights from Recent (20) Editions of the Prime Stock Newsletter
Recommendation Date Entry Point Recent Close or Exit Price Profit* Note
Informatica 'INFA' Oct. 25 $39.41 $40.66 $1.25 Sold on the 25th
Altera Corp. 'ALTR' Oct. 28 $30.59 $33.98 $3.39 Sold November 9th
Ann Taylor 'ANN' Oct. 29 $22.60 $23.76 $1.16 Sold November 1st

 

* Our November 10th short sale recommendation of Abbot Labs 'ABT' @ $50.05/share closed at $46.49/share on November 29th for a gain of $3.56/share.

* Our November 2nd recommendation of Coca-Cola 'KO' @ $61.71/share closed at $64.61/share on November 24th for a gain of $2.90/share.

* Our October 26th short sale recommendation of Avon Products @ $33.02/share closed at $28.75/share on November 3rd for a gain of $4.27/share.

 

* The per share PROFIT is a theoretical calculation based upon the opening price the day the recommendation is published and the intra day high (or low for short sales) on the exit day. The exit day is determined based upon the application of our "Rules for Trading", the implementation of "stops" within our stated policy, and may not reflect the complete or full movement of the underlying recommendation.

 

Disclaimer: The Sterling Investments series of newsletters is produced by Sterling Investment Services, Inc. All information used in the production has been obtained from sources believed to be reliable and accurate. Sterling Investment Services does not warrant or assume any liability for inaccuracy of the information used to produce our publications. To receive further information on these services please visit our web page at: www.sterlinginvestments.com If you would like to contact us our fax # is (404)-816-8830 Email address is: enelson@sterlinginvestments.com Sterling Investment Services may hold positions in the securities recommended or may be providing consulting services to the companies mentioned within this report.
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