To sell or not to sell? That seems to be the $64,000 question lately.
Six months ago the market looked like it wanted to find any sort of bearish sentiment to sell on. Not quite the case anymore.
"Instead of losing momentum the market seems to [be] gaining steam leading to one of the hardest questions a trader has to ask," Alaron energy analyst Phil Flynn said in his daily energy report. "We are seeing more bullish signs such as a dollar that continues to slip into oblivion. (The dollar has fallen as much as 1,129 points since March 4) No signs of fiscal responsibility in Washington and no exit strategy from the Fed on its policy of printing money."
"We are getting reports of growing demand from China and news from International Energy Agency raised its global oil-demand forecast for the first time in 10 months on signs that the economic slowdown is abating," Flynn added. "With the bull momentum raising, the million dollar question a trader has to ask and that is when I sell?"
Flynn noted back in March when the Fed instituted its policy of quantitative easing (which coincided with oil breaking what was then a "high" of $50/b), he pegged oil would hit $74/b.
It was thought to be a crazy claim three months ago, where oil was trading as low as $39.44/b. Now, as oil approaches that magic $74/b level, Flynn is left in a quandary.
"Yet what is not simple now is that oil is quickly advancing upon my target so now I have to wonder whether or not I just take profits and abandon the trade and just not care that this market can continue to go higher," Flynn said. "Or do I analyze the growing momentum in this market and ratchet up my target and try to ride this baby for every penny it's worth. Obviously on this there is two schools of thought."
The front-month crude contract on NYMEX settled at $72.04/b on Friday, still just shy of Flynn's $74/b prediction.
So if you're still wondering whether to sell or not, Phil offers some advice.
"The truth is you have to ask yourself whether you want to get rich or just make a smashing good trade," Flynn said. "It depends on your own circumstances. Putting greed aside we all want to get rich but at the same time you could go broke trying to get rich. If you are smaller trader and your capital is limited, take the profit."
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