If you missed the tech bubble, energy’s your next chance
The energy panic caused by Hurricane Katrina could lead to a significant top in the energy stocks.
Despite the solid fundamentals, sentiment towards energy stocks has remained at
over-exuberant levels for over a year — a feat only surpassed by technology
stocks in 1999. I do not believe that this top will represent the ultimate high
for energy stocks but I do believe it will lead to a top for the remainder of
the year. While it is difficult to short stocks that have strong momentum,
traders should remain cautious going long and investors should lighten their
energy holdings.
The energy stocks as measured by the I-Shares
Global Energy Fund
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PowerRating) have traced out a similar pattern to the Dow Jones Industrials in 1987 and 1929. I believe the recent spurt higher represents the final blow-off top for these stocks prior to a serious correction.
The DeMark Sequential â”