Stock markets hate uncertainty, and especially uncertainty compounded by confusion. The volume market makers still see opportunity in energy-source stocks, but much more selectively than in the past. They favor names that are less dependent on rises in crude prices.  These block traders forecast a few big oil stocks to have continuing accumulation by their big fund clients, and thus more favorable price trends, ones that can demonstrate volume growth. These include Imperial Oil (nyse: IMO - news - people ) and Canadian Natural Resources (nyse: CNQ - news - people ), two Canadian tar sands oil producers, as well as Petrobras of Brazil, which has a major offshore discovery to exploit in the future, and Apache (nyse: APA - news - people ), a U.S.-based international producer. APA may be valued more as an acquisition candidate for its reserves than as an ongoing entity.  All of the other big oils fall short of our investment hurdle rate of +5% probability-weighted net payoffs in the next three months.  Most investment candidates currently come from the group of independent oil exploration and production (E&P) companies that stand to be targets for acquisition by the majors. The majors need to sustain their resource reserve ratios in the face of constantly growing worldwide demand.  The most likely promising stocks from the E&P group at present prices are XTO Energy (nyse: XTO - news - people ), Range Resources (nyse: RRC - news - people ) and Petroleum Development (nasdaq: PETD - news - people ). But there are many more.  Also meeting our hurdle rate, some abundantly, are Murphy Oil (nyse: MUR - news - people ), Southwestern Energy (nyse: SWN - news - people ), Cimarex Energy (nyse: XEC - news - people ), Nexen (nyse: NXY - news - people ), Denbury Resources (nyse: DNR - news - people ), St. Mary Land & Exploration (nyse: SM - news - people ) and Cabot Oil & Gas (nyse: COG - news - people ).  In the derived-demand arena of oil services and transportation, a few names present themselves. Top of the list continues to be Dry Ships (nasdaq: DRYS - news - people ). This is an ocean transporter, not of oil but other bulk commodities, many of which are in demand due to the infrastructure development of key emerging countries. A tight ship-supply situation, which is seen continuing for a while, helps their profit margins.  Other, more traditional oil services companies offer satisfactory prospects: Helix Energy Solutions (nyse: HLX - news - people ), FMC Technologies (nyse: FTI - news - people ), Atwood Oceanics (nyse: ATW - news - people ) and Oceaneering International (nyse: OII - news - people ).  There are some newly introduced exchange-traded funds related to the energy and precious metals stocks. ETFs offer a new and interesting way to take more diversified investment positions than with individual, specific company stocks. In some cases, leverage or shorting (from a long investment posture) are provided.  Take the instances of ProShares Ultra Oil & Gas (amex: DIG) and ProShares UltraShort Oil & Gas (amex:DUG). The million-dollar market makers' current forecasts for the upside and downside prospects for these ETFs are at opposite extremes, as they logically should be. DIG and DUG are leveraged opposites of a group of big oil stocks. Buy DIG and if the stocks go up +10%, this ETF should rise about +20%. Buy DUG and if the stocks go down -10%, this ETF should rise +20%.  The potentially attractive ETF investments are all commodity-oriented. The U.S. Oil Fund (nyse: USO) is a direct play on NYMEX Crude Oil Futures. Interestingly, its forecast suggests some still higher crude prices before a deflation. PowerShares DB Silver Index (amex:DBS) is an ETF of silver investments, and PowerShares DB Precious Metals (amex:DBP) is a more general precious metals ETF investment. Market Vectors Gold Miners (amex:GDX) is another ETF.  They may all be viewed as hedges against the U.S. dollar. Some of the above is reflected in the gold and alternative-energy fuels category of stocks. There Buenaventura Mining (nyse: BVN - news - people ) and Anglo Gold Ashanti (nyse: AU - news - people ) are significantly promising plays.  Others in this group with justifiable investment potential are First Solar (nasdaq: FSLR - news - people ), Patriot Coal (nyse: PCX - news - people )JA Solar Holdings (nasdaq: JASO - news - people ) and Sunpower (nasdaq: SPWR - news - people ). There does seem to be some real developing technology in the solar power field. Not like in the political fantasies of those sniffing ethanol. Jack and Jim, the cousins Daniels and Beam, knew what to do with corn, and it had nothing to do with gas tanks.  Excerpted from the current issue of Block Traders' Oil & Gold Monitor. Click here for more of Peter Way's analysis of block traders' positions and forecasts.
Energy stocks are still a good bet overall, but you probably want to stay away from the majors.