Oil prices plunge as Hormuz reopens — load up on small caps that benefit from ch
Thesis
Saudi Arabia slashing oil prices is a massive tailwind for small, domestic companies because lower fuel and shipping costs directly pad their bottom line. Small caps are already having their best first half of the year since 1991, showing underlying strength. Even with the recent Iran tension, the reopening of shipping routes means the supply of oil is flowing freely again, keeping energy costs down and giving these smaller companies an unexpected profit boost.
Strategy approach
Construct a momentum strategy for IWM (Russell 2000 ETF) on the D1 timeframe. Entry: Enter long when WTI crude oil (USO) drops 3% over a 3-day period AND IWM is trading above its 50-day simple moving average. Exit: Take profit when IWM gains 5% from entry, or exit if WTI crude oil rebounds by 5%. Use a 6% trailing stop to protect gains.