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Thursday July 05, 2012
Rhodes' risk-on energy trades
by Richard Rhodes, editor The Rhodes Report For now, the “risk-on” moniker seems like it shall remain “on” for at least the next several weeks; we are also taking four initial trading positions in energy stocks. Market participants around the world have cheered European policy-makers for proposing to put European banks under a pan-European regulator; and directly fund the banks rather than the countries behind them; and with hope that the ECB will lower rate as well as buy both Spanish and Italian debt. We saw Spanish bond yields initially fall a “massive” 60+ bps – a move that was breathtaking and forms the cornerstone of sentiment regarding European success in solving the European debt/fiscal crisis. Do we believe the Europeans have solved their problems? No; this problem will be not be solved in the immediate future, but that doesn’t mean that markets can’t rally for a period of time. Recent gains improved the technicals of the market in a rather material manner as prices appear to have re-tested major support and broken above short-term resistance. To this end, we need to exit our short position and move to a long position. Energy shall be where we trade, for the Energy sector formed a very bullish weekly key reversal higher. This occurred in a number of the energy share charts as well; and thus we feel comfortable returning to the energy sector once again. Initially, we are taking trading positions in Baker Hughes (BHI), Devon Energy (DVN), Nabors Industries (NBR) and Alpha Natural Resources (ANR). Overall, for now we see a period of “risk-on” good feeling that could carry prices higher in the weeks ahead. Learn more about this financial newsletter at Richard Rhodes' The Rhodes Report. Related articles: 
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