Bill Poulos, Founder of Profits Run, Forecasts That Recent Price Activity in Oil May Be Indicative of Future Selloff
Bill Poulos, President of Profits Run Inc., recently forecasted a price pattern in the crude oil market that might be indicative of a future selloff. Poulos noticed the display of buying and selling of assets of the largest crude oil exchange traded fund (ETF), The United States Oil (NYSE: USO). He discusses why he believes that although this could be good news for people who are buying, the fluctuations may foreshadow a larger drop.
Pointing out the change in the market on January 14th, 2019, Poulos begins by stating, “It fell a whopping 0.83% at the open of the market today, staying in line with market analyst’s predictions. This is good news for bulls, but recent price activity may be indicative of a future sell-off. In addition, big overhead pressure pushing the market down is leading up to the makings of an oil drop similar to the one seen back in December.”
Many news sources were reporting on this trend once the books closed for December 2018. Yahoo! Finance (1/11/2019) summarized this pattern in an article titled, “Oil Prices: Crude Oil Is Quietly Having Its Longest Winning Streak in Nearly a Decade”, describing the fourth quarter of 2018 as, “an ugly one for oil prices. Crude crashed 40% over the final three months of the year, putting them down 19% overall. In one particularly brutal stretch, oil lost value for 12 straight days, which wiped out 12 months of gains. Crude prices, however, have quietly reversed course, rising for the last nine consecutive trading sessions. That’s oil’s longest winning streak in nine years. Overall, the price of WTI, the U.S. benchmark, has risen about 18% from the bottom — which, incidentally, is just shy of starting a new bull market — and was recently over $52.50 a barrel. That’s a key pricing level for oil stocks, which is why investors should take notice.”
Poulos suggests that part of the reason the oil market is in flux is due to potential changes in Chinese policy. An article titled “Oil ETFs Pop on Global Growth Outlook as China Looks to Stimulus Measures” by ETF Trends (01/15/2019) reported that Oil prices and oil-related ETFs fluctuated on Tuesday in response to expectations of increased global growth as China considers enacting stimulus measures to support its wavering economy.
Regarding China, Poulos goes on to explain, “Rumors out of China have showcased weak import/export figures for December of 2018, convincing many investors that a global economic slowdown is at hand. The slowdown would lead to an inevitable reduction in market activity which would then lead to a decreased demand for oil, causing prices to flop.”
With this information, Poulos suggests, “Should prices close out below last Wednesday’s low, the next slide to the bottom could follow shortly thereafter. In USO’s case, that previous low was 10.69. Wednesday’s gap of near 3% could have possibly used up an excess of market energy for that single trading session, and Friday’s red candles are further evidence of it. Another red candle day today might be enough to plunge oil down to key support.”
Despite these recent fluxes in price, Poulos points out that crude oil is still overvalued. He states, “In the big picture, crude oil is still oversold, having lost 65% of its value over the course of the last decade. Even though it has slid down dramatically since the highs in October 2018, it’s still trading well.”
Back in October 2018, Poulos noted that there is nothing to fear in the long term. In his Medium (10/12/2018) article titled, “Bill Poulos: Dow Drops 800 Points-Look Out Below, Maybe Not.”, he says, “The economy is as strong as it’s been in years and it’s projected to remain strong for the foreseeable future. Unemployment is at all-time lows while job creation is at all-time highs. Corporate earnings are very strong and there is relative peace in the world — at least no war between major powers.”
The oil fluctuations are not all bad news — and other industry experts seem to agree. An article from Forbes (12/26/2018) titled, “The Oil And Gas Situation: Eight Predictions For 2019”, suggests that “that the domestic oil and gas industry will continue to set new all-time production records in each of the first six months of 2019. The lack of any governmental mechanism to force producers to slow down for their own good, the antitrust laws that prevent them from banding together to do so voluntarily, and the pressures to achieve short-term production goals to satisfy investors all combine to ensure that most companies will keep drilling and completing uneconomic wells in the near term as they hope for some magic solution to the low price environment in which they now find themselves.”
The silver lining is that Poulos believes there may be a small window of opportunity for profit. He stated, “To say that we’re experiencing a bit of whiplash trying to follow the crude oil market would be an understatement, especially given the fact that it broke out of the bear market in recent weeks. In that time some savvy traders may have been able to pocket some substantial gains in the New Year, and it looks like another such opportunity is on the horizon.” He goes on to say, “In the short term, however, oil bears may be looking at a nice opportunity to snatch some quick gains in the wake of China’s economic distress.”
Bill Poulos is the president and co-founder of Profits Run. He took his hobby of trading stocks and turned it into a business with his son as co-founder. Through his company he spends much of his time being a financial educator. He holds a bachelor’s in engineering from GMI and an MBA with a major in finance from the University of Michigan. He is a retired executive from General Motors and continues to be a philanthropist in helping underprivileged youth both in America and abroad. Poulos is from Detroit but enjoys maintaining strong ties with his Greek background. In 1969, Bill married his high school sweetheart, Karen. They have been happily married for 48 years and together have three sons.
About Profits Run, Inc.
Bill Poulos co-founded Profits Run in 2001 with his son, Greg Poulos. Profits Run’s goal is to teach anyone how to become a better investor and trader in any market. Profit Run operates in stocks, options, exchange-traded funds (ETFs), and foreign exchange (forex) markets. Profit Run welcomes everyone to learn how to be a safer and smarter investor by providing training, software, and coaching for everyone at every level of experience.