Traders have pushed the price of crude oil higher for the week on forecasts that Tropical Storm Gustav will intensify into a hurricane as it ploughs toward the U.S. oil and natural gas platforms in the Gulf of Mexico.
What’s the hurricane play?
Don’t play the spot price of oil right here, says Joe Terranova on CNBC’s “Closing Bell.” That also means if you’re an ETF fan, do not buy he United States Oil Fund in anticipation the hurricane will take it higher.
If damage is minimal, as it usually is, crude could plunge. "This is too fast of a trade for most investors,” Terranova says. “No one other than a professional trader who’s sitting in front of a screen is fast enough for this trade.”
Also, if there's no catalyst to take oil higher Terranova thinks it can very easily slip under the 100-day moving average which is right around $110 and technically the market could then roll to $100.
Okay. So we’ve convinced you to stay away from a direct crude trade. But what about the refiners. Are they in play? “No,” replies Terranova. “A hurricane into the Gulf should have moved the refiners much more than they’re moving today.”
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However, if you want to play energy Terranova does have a trade. “If you have the view that oil will move higher long term on demand pick an oil service stock or integrated name such as Suncor or Petrobras. Otherwise stay on the sidelines for a while.
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