Oil Set To Spike Another 20%: Buy These Stocks

Oil has put in a near term bottom. While most analysts are insanely bearish, the charts and cycle work confirm it. The upside target is $38.00-$40.00 per bbl. The price action in oil has changed dramatically in the last few weeks. Bearish oil inventory reports have initially caused a quick sell off, only to reverse and squeeze the price higher. When you see this type of price action at the lows, it is an extremely bullish signal. Simply put, it means institutional money is buying the dips now. Of course they will not tell you that, but the money flow proves it.

With 20% upside in oil, many beaten down oil stocks will see dramatic squeezes. You can see the squeeze taking place already on names like Freeport-McMoRan Inc (NYSE:FCX). Freeport is already up over 50 its recent lows and saw as much as a 24% gain today before pulling back. So what are other names that should see a squeeze if oil is to climb another 20%? Companies like Seadrill Ltd (NYSE:SDRL), Kinder Morgan Inc (NYSE:KMI), Transocean LTD(NYSE:RIG) and Chesapeake Energy Corporation (NYSE:CHK).

Every one of these names is loaded to the top with shorts. An oil price near $40 would cause massive short covering. These stocks probably have 30-50% upside potential if (and only if) oil spikes close to $40.00.

Gareth Soloway
InTheMoneyStocks