Pessimism Returns To Energy Equities

Editor's Note: I am back from my trip and ready to roll.

It was just 2-months ago that I got into an argument with a friend over just how overbought energy equities were. I pointed out at the time that if you look at some of the technical indicators in names like Meg Energy and Cenovus Energy, they were exhibiting the most overbought technical conditions in history!

In addition to the overbought technical indicators, the bullish sentiment we saw on Twitter was just too much for us. This is why back in early April, we decided to liquidate most of our energy holdings, cashing out from Cenovus and Meg Energy (see MEMO).

Fast forwarding to today, I'm seeing the polar opposite in sentiment. Energy investors alike are staring at the nonstop ascent in names like Nvidia and pondering why they ever got interested in this dreadful sector. We are seeing some long-time veterans doubting their very own existence, which is precisely the kind of sentiment we want to see.

From a timing perspective, we did not time this pullback perfectly. We deployed a chunk of cash in our HFI Portfolio too early into names like Veren, Suncor, and Vermillion. These 3 names have all pulled back.

The only name that we added to that didn't pull back was Athabasca. Our new and largest position in the portfolio, Strathcona Resources, has been flat since we bought it.

But with cash on hand in the trading portfolio, we decided to get aggressive with Meg Energy and Cenovus (subscribers, please see trade alert). Both names were covered in detailed write-ups this week and subscribers got advanced notice on our intent on buying both names.