Pullbacks in the Oil Patch
Compared to financials and technology, energy stocks have underperformed over the past few months. While the Financial Select Sector SPDRS ETF (NYSE: XLF) and the Technology Select Sector SPDRS ETF (NYSE: XLK) have joined the S&P 500 in taking out their late October highs, the Energy Select Sector SPDRS ETF (NYSE: XLE) has failed to do so. In fact, the XLE has leveled off and has been trading in a sideways range just above its 200-day moving average for the past several days.
What this has meant in terms of individual energy stocks, including those like Exxon Mobil (NYSE: XOM) that were only recently trading at their highest levels in months, has been significant profit-taking. XOM, for example, have closed lower for five out of six trading days heading into Friday’s session, with three of those closes in technically oversold territory. And selling off after rallying to their highest level since the summer of 2011 are shares of Occidental Petroleum (NYSE: OXY). Occidental has finished down for three out of the past four trading days and is technically oversold.
Of the two, OXY may be more worth watch-listing, given the stock’s “consider buying” rating of 8 out of 10. Shares of Exxon Mobil have a far more neutral, 6 out of 10 rating, suggesting the stock likely has further to fall before becoming inexpensive enough to draw buyers off the sidelines.
The bounce of more than three quarters of a percent in Chevron Corp (NYSE: CVX) on Thursday could be the start of just that. The stock closed lower for five days in a row – four in technically oversold territory – leading into Thursday’s trading, and had earned a ratings upgrade to 7 out of 10 for the previous three days. And although a 7 rating puts the stock in our “neutral” category, the relatively high rating often makes these stocks almost as attractive and worth watching as stocks with ratings of 8. Note that in the case of Chevron, upgrades to a rating of 7 anticipated reversals in the stock in early November (a rally of more than 6% in five days) and more recently in mid-January.
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David Penn is Editor in Chief of TradingMarkets.com.