Public trading strategy
Peace talks ease oil shock fears — buy shipping and airline stocks on the dip
Thesis
The spike in oil prices caused by the Iran war has squeezed companies that depend heavily on fuel, like airlines and shipping firms. With peace talks reportedly on track and Kuwait suddenly shipping oil to Asia again, the global oil shortage might be easing faster than expected. If oil keeps dropping, transportation and logistics companies will see their fuel costs plummet, giving their profits a sudden boost. This creates a great opportunity to buy these beaten-down stocks while they are still cheap.
Strategy approach
Build a mean-reversion strategy that enters long XLI, UPS, and JBLU on the daily timeframe when crude oil (USO) drops 3% or more in a single day. Hold for 10 to 15 trading days, setting a profit target of 5% and a stop loss at 2.5%.