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Fast Money HomeFast Money Rapid RecapAbout Fast MoneyFast Money BiosFast Money Web ExtraFast Money Disclaimer
Text Size
Sep.03
5:50 PM ET
Wednesday, 3 Sep 2008
Cheer Or Fear Drop In Oil?
Posted By:Lee Brodie
Sectors:Oil and Gas

OIL KEEPS FALLING... MARKET FAILS TO RESPOND

Despite falling oil, stocks [.SPX  Loading...      ()   ] slipped in choppy trade Wednesday as signs of sluggish growth left investors worried about the outlook for consumer spending and corporate profits.

OIL DOWN 4 STRAIGHT DAYS

On Wednesday oil [US@CL.1  Loading...      ()   ] continued to trade lower, touching $109, its lowest level in 5 months. Technical traders say oil has broken a key support level and as a result they expect deeper declines.

Don’t expect oil to launch the market higher, exclaims a disgruntled Jeff Macke. It’s never been the catalyst we’ve made it out to be. Now, we’re beating this nag like Secretariat.

I can’t help but think there will be other funds such as Ospraie which had to close its doors because of wrong-way bets on energy, adds Karen Finerman.

Energy continues to look weak to me also, Pete Najarian injects. I, too, think the hedge fund unwind is pressuring this thing down. If you trade the space make sure you do it with a tight stop!

My sense is the next move is higher, counters Guy Adami. I wouldn’t short crude here. It could snap to $115.


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CHEER OR FEAR OIL DROP?

Oil is already down nearly $40 dollars since its July 11th record, while the dollar grows stronger almost every day. As a result, investors have experienced rapid changes in the commodities market, leaving many traders badly bruised, to say the least.

Should we cheer or fear this drop in oil?

”I came into the new year cautious of oil,” says Raymond James chief investment strategist Jeff Saut on Fast Money. “But now with the declines oil has taken, as well as the world wide demand characteristic and the emerging middle classes, I think longer term there’s a tail wind."

"Production of crude has been flat at about 85 million barrels a day but consumption is coming in around 87 million barrels a day,” Saut adds. "I think if crude trades down to $100 I’d be a buyer on global growth,” he concludes.

What do you think? Tell us now!








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COMMODITY STOCKS COLLAPSING…GOLD DROPS

Miners such as Freeport-McMoRan [FCX  Loading...      ()   ] and Newmont Mining [NEM  Loading...      ()   ] were down big on Wednesday with aluminum producer Alcoa [AA  Loading...      ()   ] being one of the largest drags on the Dow [.DJIA  Loading...      ()   ].

Don’t beat up Alcoa, exclaims Guy Adami. They had a great first half of the year.

Making aluminum is the most oil intensive thing on the planet, says Karen Finerman. Alcoa should be going higher on the decline in oil, unless the ultimate demand for aluminum is lower.

If you’re looking to play commodities, I’d get long Potash [POT  Loading...      ()   ] at $150, adds Jeff Macke, with a stop $145.

I agree, adds Guy Adami. This is the level to take a shot in Potash.


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OPTIONS ACTION...FRONTIER OIL

Pete Najarian is spotting unusual options action in Frontier Oil [FTO  Loading...      ()   ].

The volume of options trading suggests to Pete that this stock could go higher. Specfically, he thinks margins could improve due to lower oil prices.



----------------(scroll down for more trades)----------------







THURSDAY’S STORY: RETAILERS

Investors are eager to hear from retailers on Thursday with Wal-Mart [WMT  Loading...      ()   ] and Target [TGT  Loading...      ()   ] among the many to post August same-store sales.

I expect the results to be grim, says Jeff Macke. The question isn’t whether they had a bad month, it’s the reaction from the stock market. I’m trading it by staying long Wal-Mart.

J. Crew [JCG  Loading...      ()   ] has moved 20% in two weeks, adds Karen Finerman. When a stock moves this dramatically you have to take profits.

I think the same is true of Home Depot [HD  Loading...      ()   ], adds Guy Adami. It’s time to get out.


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NASDAQ'S WORST 3 DAYS SINCE JUNE

Shares of Corning