Seeking opportunities in crisis


It’s often said that Chinese has the same word for “crisis” and “opportunity.”

While this saying appears to be more of an urban legend than a correct translation, it’s still a good reminder for investors. And, Warren Buffett’s expressed a similar sentiment by saying to “be greedy when others are fearful.”

Well, today people are fearful because of more trade squabbles with China. Are there opportunities to get greedy with the S&P 500 suffering its biggest drop since late May? Let’s consider some companies that have pulled back and may offer some potential entries.

The first area to consider are oil refiners. Did you know companies like Valero Energy (VLO), Andeavor (ANDV) and Phillips 66 (PSX) have risen 15-25 percent so far this year? Did you know they’re riding a way of strong pricing for gasoline and a profitable differential between WTI crude and Brent crude? Did you know many companies in this industry have pulled back to some levels where chart watchers may see an opportunity?

Phillips 66 (PSX) with 50-day moving average.

Refiners have followed other energy stocks lower in the last month as investors brace for OPEC and Russia to increase oil production at their meeting later this week. But that news may be priced in and economic growth remains strong. Furthermore, strong U.S. production has limited the price of WTI crude while global quotas have allowed Brent to rise. That’s widening the “crack spread,” refiners’ industry’s most important source of profit.

One other name popped up on my specialized pullback scanner: Juniper Networks (JNPR). The tech stock has muscled higher since showing signs of a turnaround in early May, and had a bullish options trade on June 8. Since then it’s pulled back to a potential support level around $27.

In conclusion, this isn’t a trade recommendation and everyone needs to do their own homework. But stocks have pulled back despite good fundamentals and strong economic data. There could be “opportunities” in the current “crisis.”

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.