To The Moon

As we have seen for the past few days or past week, the U.S equities market have been on the downside. Many factors have contribute to this downward trend.

Mainly due to China economy recovery slowdown, U.S. Fed rate hike decision, U.S. banks credit ratings risk.

I have been monitoring how the oil prices have been trading and also how have the energy stocks been doing. It seems like we can find some opportunities.

There is no doubt of an increase in the energy demand and one of the primary sources of energy, crude oil, has been used by the global economies as pivot for decades.

As oil prices experience periods of volatility, there are opportunities to be found to generate substantial returns by strategically investing in energy stocks.

When oil prices are up, the energy sector tends to flourish, making it an appealing prospect for those seeking potentially lucrative investments.

Energy was the only S&P sector gainer on 17 Aug (Thursday), as U.S. crude oil futures move up back above $80 per barrel.

This follows a three-session skid that was encouraged by data showing U.S. oil production is climbing toward record highs even though Saudi Arabia and Russia have been cutting output.

In this article I would like to share what I have found from understanding the relationship between oil prices and energy stocks.

I will be sharing some energy stocks that we can look at.

Understanding the Dynamics

The relationship between oil prices and energy stocks is deeply intertwined. When oil prices rise, energy companies that engage in exploration, production, refining, and distribution tend to see increased profitability. Higher oil prices lead to higher revenues for these companies, which can ultimately result in improved financial performance and higher stock prices.

Diversification of Energy Sources

Investing in energy stocks when oil prices are up doesn't solely mean investing in traditional oil and gas companies. The current energy landscape is evolving rapidly, with a growing emphasis on renewable and sustainable energy sources such as solar, wind, and electric utilities. When oil prices surge, governments and industries tend to allocate more resources towards developing alternative energy solutions, thereby benefitting renewable energy companies and electric vehicle manufacturers. As such, a diversified energy stock portfolio can include both conventional and renewable energy companies.

Factors to Consider

1. Market Analysis: Before investing, it's crucial to conduct thorough market analysis. Study trends in oil prices and assess whether the current price surge is due to short-term fluctuations or fundamental shifts in supply and demand.

2. Company Fundamentals: Evaluate the financial health, management track record, and growth prospects of energy companies you're considering. Look at their production capabilities, cost structures, and exploration activities to gauge their potential to benefit from high oil prices.

3. Geopolitical Factors: Geopolitical events can significantly impact oil prices. Keep an eye on global conflicts, supply disruptions, and diplomatic tensions that could affect oil supply chains.

4. Sustainability: As concerns about climate change grow, investing in companies with sustainable practices can offer long-term value. Consider companies that are actively transitioning towards cleaner energy sources.

5. Government Policies: Government policies, subsidies, and incentives can influence the energy sector's profitability. Research the regulatory environment in the regions where your chosen companies operate.

Potential Benefits

1. Profit Potential: When oil prices are up, energy companies' profitability tends to increase, potentially leading to higher stock prices and dividend payouts.

2. Diversification: Investing in energy stocks provides diversification benefits, as the energy sector's performance is not solely reliant on oil prices. Renewable energy companies can add stability to your portfolio.

3. Cyclical Nature: Energy stocks, like oil prices, often follow cyclical patterns. By timing your investments during a price surge, you position yourself to benefit from an upswing in the sector.

Risks and Considerations

1. Volatility: While rising oil prices can lead to profitability, they can also lead to increased market volatility. Be prepared for price fluctuations and potential downturns.

2. Global Trends: The world is gradually shifting towards sustainable energy sources. Failing to adapt to this transition could leave conventional energy companies vulnerable in the long term.

3. Regulatory Changes: Changing government policies and regulations can impact the energy sector's profitability. Stay informed about potential shifts that could affect your investments.

Energy Stocks You Can Look At :

$Exxon Mobil(XOM)$ Assess Using Parabolic SAR

XOM has a bullish reversal near end of July so the recent oil price surge does contribute to its recent price upside.

But XOM should have a pretty strong price fundamental and I foresee that its bullish upside should continue with more U.S. production of oils increases.

$ConocoPhillips(COP)$ Assess Using Parabolic SAR

COP has a recent bullish reversal and this is due to price target raised to $135 from $127 at Mizuho. With the oil price going up, I believe the bullish upside should continue.

I foresee COP to have a better gain in the coming weeks.

Summary

Investing in energy stocks when oil prices are up can be a rewarding endeavor, provided we approached it with a solid understanding of market dynamics, thorough research, and a long-term perspective.

The energy sector's complexity requires investors to carefully assess each company's fundamentals, diversify their portfolio, and remain adaptable to changing market conditions.

Like the 2 energy stocks I shared, there are lot more fundamental and technical data you need to find out in order to prepare your trade.

What I have show you is by using only a single technical indicators (Parabolic SAR). It is always important to take note that with the world's increasing demand for energy.

And the ongoing transition to sustainable solutions would also contribute to greater demand, we should plan strategic investments in the energy sector in our diversified and well-rounded investment strategy.

This should give us substantial returns in the long run.

Appreciate if you could share your thoughts in the comment section whether you would consider these 2 energy stocks since market volatility might remains for quite some time.

@TigerStars @Daily_Discussion @TigerWire  appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.