How to make money off overpriced oil stocks

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By Jacob Maslow

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I don’t want to sound like a vulture circling over a herd of dying cattle but there’s a lot to be made in the stock carnage being caused by global oil’s crash. We’re now officially at the 50% mark for oil price declines; this means oil is now exactly priced at just half or under half of its value from its peak value. This is a golden opportunity to look at the stock price of some of the biggest players in the oil extraction or oil-related industries.

How to tell if a stock has a long way to crash
We’re currently in a bear market for oil stocks. When in bear mode, you make your money by borrowing the stock at a high price, selling it at that high price, and buying it back to cover your position when the stock price has crashed to your targeted low price. Short selling is definitely one of the best ways to make money in a bear market and you should definitely look into short selling oil stocks. The problem is how to pick which oil companies to short. I have a very simple strategy: look at their current prices and see how much oil was priced the last time the stock hit its current price.
For example, company A is trading at $80 per share now. Look at the historical share date for company A and find the last time A traded at $80 in the past. Now, look at the historical price data for oil and see how much oil was priced at that time. If the price of oil is priced at $100 or more per barrel the last time company A was trading at $80 per share, this means the company is still overvalued. You should short that stock since oil is now below the $50 range. Clear?
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