Follow The Process (Part 2)
On April 9, we published our WCTW titled, "Follow the Process." At the time, we wrote that 1) our process indicated oil prices to pull back in the near term, 2) energy stocks were overbought, and 3) we should continue to follow the process for indications on when to go back long.
We concluded our April 9 article by saying:
I believe there is a lot more work ahead for us if we want to keep improving. For the process, we have implemented sentiment, physical, and other fundamental indicators to help manage our expectations on oil prices. But the reality is that the market is always evolving, and we should always strive to be better. Looking at the process today, it is saying that oil prices will pull back. And for readers, we think now is the time to be cautious.
Throughout HFI Research's history, we have always been labeled as a "perma-bull" and the criticism/description was well deserved. At times, we were too blinded by our own biases to come to a sensible conclusion on the oil market, and more often than not, I was a victim of the saying, "I am my own worst enemy."
So when that WCTW was published with the trade alerts that I was selling out of Suncor and Cenovus Energy, readers frantically messaged us wondering what had just occurred.
A day after our WCTW was released, we issued trade alerts on selling out of Meg Energy and Athabasca. My memo was released following the trade alert to explain why.
Since then, WTI has meaningfully corrected from $85 to $79, while energy stocks have not meaningfully corrected with some of the names we sold only ~3 to ~7% off of the highs.
But as I will explain in this article, our process continues to indicate near-term weakness in both oil and energy stocks. For readers watching the fundamentals, sentiment, and technicals closely, we continue to urge more patience as this correction takes place.