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The market is facing a triple threat: surging energy costs, stalling growth, and a geopolitical powder keg. With oil crossing the critical $99 mark and GDP hanging by a thread, the margin for error has disappeared [tap to join us for Profit Panel]
Energy stocks took a hit on Wednesday, and if you’re holding any of the major oil names, you probably felt it. Some names barely moved, but others got hit hard, and it wasn’t exactly a comfortable tape to sit through.
Part of the pressure came from geopolitical noise, with reports that a major Saudi pipeline was hit. Normally, that kind of headline would send crude sharply higher, but this time the reaction was muted.
Crude moved up a bit, just not in the way you’d expect. That kind of response tells you this market is still jittery and not reacting to news in a clean, predictable way.
The Disconnect Nobody’s Talking About
Here’s what I’m focused on: Q1 earnings. When you compare where oil traded for most of the quarter to where it sits now, there’s a meaningful gap.
That gap matters because earnings reflect what already happened, not where prices are today. And for much of Q1, pricing was strong enough that these companies likely built a solid profit base.
The market is reacting to current prices, but the income statements will reflect the last three months. That lag is where opportunity can show up.
What I’m Watching Going Forward
I’m not saying oil snaps right back, but if it can work its way toward $60, the conversation changes. That’s where a lot of these names start to look more interesting again, especially if earnings come in stronger than expected.
This recent weakness could end up being noise ahead of solid Q1 reports. It’s not a signal to chase, but it is something to keep on your radar.
If you got shaken out or have been waiting on the sidelines, this might be one of those moments worth watching closely.
The fundamentals during the quarter were stronger than current price action suggests, and that’s the kind of disconnect I pay attention to.
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Geof Smith
Geof Smith Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. 60-0 trading this Gold ‘Glitch’
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Disclaimer: We develop strategies to the best of our ability, but we cannot guarantee a future return. There is always a risk of loss when trading. Past performance is not indicative of future results. Since 12/05/2024, the trading approach discussed today has published 60 trade alerts. All 60 have returned as winning trades, for a 100% win rate. The average return per trade, winners and losers combined, has been 16.88% on an average holding period of 9 days.
