Back in 1997, I enrolled in the Market Technicians Association.
The MTA is a school for professional investors who want to become experts in technical analysis.
The designation awarded after successfully passing three years of rigorous chart studies and tests is the CMT, or Chartered Market Technician. (Think of it as a Chartered Financial Analyst, but for stock charts, etc.)
Every brokerage house and money management firm in America either has an in-house CMT, or consults with one.
That’s how important it is.
During my studies at the MTA, it became quite clear to me that all the sophisticated technical patterns like Fibonacci retracements and death stars didn’t hold a, ahem, candlestick to the most basic of technical analysis…
I’m talking about support and resistance levels, fifty-day and 200-day moving averages, and ominous chart patterns like “head-and-shoulders” and “double-bottoms,” which look like a giant “W”.
I recently came across a “W” pattern in the chart of WTI oil.
Take a look:
The price of oil began to sell off in May of last year after reaching nearly $115 a barrel.
After a couple unsuccessful rebounds to get to the old high, oil sold off in earnest in both August and October, bottoming both times around $75 a barrel.
$75 a barrel was the bottom.
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It contains full details on why dividends are an amazing tool for growing your wealth.
During this period oil was testing its bottom (support), crude created a very noticeable “W” pattern.
I’ve circled the pattern for you in the chart above, but it’s easy to recognize.
Now, in technical analysis, they teach you to predict the price move from a breakout of a “W” formation.
Basically, you take the highest level reached in the formation (in this case, it’s about $100) and the lowest reached (in this case, it’s $75).
You subtract the lowest number from the highest. The result is $25.
You then add $25 to the highest level reached in the “W” formation, which as you know, is $100.
You now get a price target of $125.
In this past Saturday’s Wealth Daily, I told you that some energy analysts are predicting a 50% jump in the price of oil if the situation in Iran turns into an armed conflict or an oil blockade.
As a technical analyst, I’m starting to think either scenario is baked in the cake, according to that oil chart.
The market believes something is going to happen.
And historically, if the market thinks something will happen, it usually does.
Let me be clear: If the price of oil fulfills its technical destiny and reaches $125 a barrel, it’ll hurt Americans as it’ll jack up the price of gasoline.
However, you can hedge this by buying domestic oil and gas stocks.
You can offset the price you pay at the pump with the capital appreciation you get in American oil and gas stocks…
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But if you’re looking for dividends, my favorite oil dividend stock — Petrobakken — recently broke out to a five-month high of $13.42.
That’s a 133% gain from its October 4th low.
At current levels, it pays a hefty 7% dividend.
And remember, those dividends are paid monthly.
Had you bought at or near the October lows, the dividend yield on your position would’ve been 16%…
If only we could go back in time!
The original bull on America,
Brian Hicks
Check us out on YouTube!Brian is a founding member and President of Angel Publishing. He writes about general investment strategies for Wealth Daily and Energy & Capital. For more on Brian, take a look at his editor’s page.
