Peak Oil? 3 Overbought Oil and Gas Stocks
It may be hard to imagine that there are markets still trading in overbought territory after Monday’s strong sell-off, a sell-off that took the Dow down by more than 200 points.
But while the selling was indeed widespread, there are a few stocks in a few sectors that managed to escape notice of sellers. The question for short term traders is whether or not these overbought stocks will continue to elude traders looking for markets that have moved too far, too fast, too soon, or whether profit-taking and renewed short selling will come to these markets, as well.
A perfect example of these overbought and short-term overvalued energy stocks is Williams Companies (WMB). Shares of WMB closed higher for seven out of nine trading days heading into Monday’s session, and WMB has become among the lower rated, “consider avoiding” stocks in our database. After WMB opened big on Monday, sellers moved in immediately to send the stock toward its lowest levels of the day. Despite this, WMB will carry its low rating into Tuesday’s open, having managed to finish in overbought territory again on Monday.
Up more than 5% ahead of trading on Monday and finishing in overbought territory below the 200-day for a second day in a row were shares of Anadarko Petroleum Corp (APC). Monday’s gains brought the stock to its highest closing level in a month and hinted at the possibility of the stock climbing back out of bear market territory (APC fell below its 200-day moving average in early August). Traders however should be wary; given its low rating and multiple overbought closes, APC could head lower in the short term, before moving higher.
Whatever you might think about BP PLC (BP), you’ve got to hand it to the stock over the past several days. Trading in bear market territory, shares of BP have closed higher for an eye-popping ten days in a row, with the most recent six days in overbought territory.
As such, it is no surprise that the stock has earned low, “consider avoiding” ratings over the past week. In fact, the only big surprise in the market for BP at this point is that the stock is not rated even lower. With 10 consecutive higher closes, BP is more than due for a pullback and the longer the stock continues higher without pulling back, the greater the likelihood that the pullback, when it occurs, will be significant.
All three stocks in today’s report were pulled from stock lists available through PowerRatings. To learn more, click here.
David Penn is Editor in Chief of TradingMarkets.com