These Oil Stocks Are Breaking Out!

| April 7, 2015 | 0 Comments

crude oilBulls Are Charging These Oil Stocks!

Oil stocks are starting off the week with a bang…

With the price of crude rallying strongly above $50 a barrel on Monday, investors are rushing into oversold oil producers.  Many oil stocks showed hefty gains yesterday and will likely add to those advances in coming months.

I’ll explain why in a minute.

But first, let’s discover why crude is rallying in the first place…

As you may be aware, it was big news when Western powers reached a nuclear deal with Iran late last week.  The West has been at odds with the rogue country for years over its burgeoning nuclear program.  With a nuclear weapon, Iran would cause big problems for the Middle East.

But there was a different worry amongst oil investors…

If a deal was reached, oil sanctions against the country could be lifted.

And that meant over 1 million barrels a day of Iranian oil would hit the global marketplace in the near future.  With the market already oversupplied by an estimated 1.5 million barrels a day, more supply could send WTI and Brent plummeting to new yearly lows.

While the fear was justified, the details behind last week’s agreement reveal the end of Iranian oil sanctions are a long way off.

I won’t rehash all the details of the deal here.  All you need to know is there’s very little chance of Iranian oil hitting the global marketplace in 2015- or at all for that matter.

In my opinion, there’s more that can go wrong with the nuclear agreement with Iran than can go right.

But I digress.

What’s really important to energy focused investors like us is what the deal means for the price of oil and the companies producing it…

Oil Stocks: Ready For A Breakout?

Since investors had a three-day weekend to dig through the details of the Iranian deal, they realized there’s no imminent threat of new oil supply hitting the market.

That’s likely why we saw the undeniably bullish price action in the Energy Select Sector SPDR $XLE and the SPDR S&P Oil & Gas Exploration & Production $XOP yesterday.

If you’re not sure what $XLE and $XOP consist of, be sure to check out this article.

Take a close look at these charts…

Oil stocks, a chart of $XLE

And now for the $XOP…

Oil stocks, a chart of $XOP

As you can see, both oil stock ETFs are breaking above important resistance trend lines (red lines).  While I don’t expect $XLE and $XOP to go straight up from here, it’s very likely we see additional gains in coming months.

Given the technical breakouts in the ETFs above, it came as no surprise to see strong gains across the oil and gas exploration industry yesterday.

Names like Oasis Petroleum $OAS, Matador Resources $MTDR, and Continental Resources $CLR racked up gains of 12%, 9%, and 6% respectively.

Make no mistake, yesterday’s energy rally was broad and well received by investors.

But like I’ve said many times before, navigating through the oil and gas exploration industry is akin to tiptoeing through a minefield.  There are a slew of heavily indebted oil companies at risk of bankruptcy right now.

Choose the wrong one, and your energy portfolio could be wiped out.

That’s why you may want to just stick with $XLE and $XOP.

You get instant industry diversification while leaving your portfolio open to the strong upside potential in oil and gas related stocks.

Commodity ETF Alert Subscribers Knew This Would Happen…

In February, I alerted subscribers in my premiere commodity ETF trading service, the Commodity ETF Alert, to the long-term buying opportunity in $XLE.  At the time, I proposed the ETF would benefit from rising crude prices in mid- and late-2015.

But since there was still plenty of uncertainty surrounding the price of oil in February, I told my subscribers $XLE would likely make one more turn to lower prices before the real rally hit.

We saw that downturn in March when $XLE sank to the $74 area.  

But astute Commodity ETF Alert readers were instructed to buy $XLE on any looming weakness.  Now, with the downturn likely in the rear view mirror, I believe my subscribers can sit back and enjoy the ride to higher prices.

Let me ask you something…

Are you ready for a swift upturn in oil stocks?

Until Next Time,

Justin Bennett

BIO:  Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com.  With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them.  Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.

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Category: Crude Oil, Natural Resource Stocks

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.