I will never swing trade OIL for consistent income. Here is why.
Jumping into a Swing Trade with OIL may appear very tempting. OIL has been beaten down like a rabid dog for the last 5 years straight. It’s like the owner of the OIL dog put a shock collar on it and tapped the trigger down.
It’s tempting, so very very tempting. It’s so low it must go up!
The GUSH OIL ETF is a security that I’ve always liked to play, but it never came without long term risks and eventually I came to my senses and stopped the madness. I remember sitting in a chatroom from a popular youtube channel. I sat, watched and listened to people trading GUSH like it was the end all-be-all swing trade.
I entered the chat room when GUSH was trading around $15 well before the 2020 split, I think that was 2019 if I remember correctly.
“OIL can’t stay this low forever.”
“Everyone needs OIL, I’ll just hold this stock and sell it later when it goes up.”
The emotional attachment that people had to GUSH and OIL in general was astonishing, but I wasn’t surprised that people were trading GUSH. OIL seemed like one of that commodities that should be doing good all the time. It should recover over and over again, it is the “black gold” after all.
Two months later GUSH went below $3 a share. So much for hopes and dreams.
If people would just compare OIL to that of the S&P 500 they could easily see that OIL is a terrible swing trading sector. XOP, GUSH etc….they are all in a massive bear market and have been for some time now. Add the coronavirus to the bear market and it’s even more goolish looking.
So when should we look at OIL for swing trading? My answer is simple. I will never swing trade OIL for consistent income. I might make some short plays while on vacation when I have time to day trade, but I won’t swing trade OIL as part of my regular passive swing trading strategy.
As for me? I’m sticking to swing trading index funds like SPY, VOO, SPLG with the occasional swing trade in a big blue chip company like MSFT.
As always, have a plan and stick to it.