Three Oil Stock Charts To Watch Closely…

| November 3, 2015 | 0 Comments

oil and gasWatch These Oil Stock Charts Closely…

After a failed breakout attempt in early October, West Texas Intermediate (WTI) crude has fallen back into the same shiftless trading pattern that’s been in place since early September.

In fact, the closely watched commodity is currently trading at the same price it was two months ago… $46 a barrel.

Take a look…

Oil stock chart, WTI daily

As you can see, there’s not much to get excited about in crude right now.  The technical situation is rather ambivalent while the fundamental backdrop is as murky as ever.

But take a look at this…

A number of the world’s largest oil producers are rallying strongly in recent trading.  Take Exxon Mobil $XOM for example.  The world’s largest oil producer is up 12% in the past month…

$XOM oil stock chart

As you can see, $XOM is surging past the 200-day moving average (red line) and the downtrend from the July 2014 highs (green line).  This is bullish price action indeed.

Believe it or not, a similar pattern is appearing in Chevron $CVX

$CVX oil stock chart

The world’s third largest oil producer by market cap is up 16% in the past month.  What’s more, it’s quickly approaching the same technical barriers $XOM just surpassed.

And that’s not all…

$EOG oil stock chart

EOG Resources $EOG has rallied nearly 17% the past month.  Notice how shares of the $47 billion market cap energy producer are trading in a nearly identical technical pattern to $XOM and $CVX.

A little further research reveals a number of large-cap energy producers are on the verge of very important technical breakouts- just like the stocks above.

What’s going on here?

Why are top-tier energy names rallying while the price of crude trades sideways?

Quite simply, aggressive energy investors are betting the oil market’s worst days are behind it.

With the share price of leading crude producers quickly seeking out higher ground, it’s highly unlikely WTI falls into the $20 a barrel range like some suggest.

If downside in WTI is limited, it makes sense to put capital to work in the world’s most financially resilient oil companies.

In other words, the cream is starting to rise to the top in the energy space.

Now let’s be clear…

The rally in the exploration names above doesn’t mean oil is about to surge to $70 a barrel.  In fact, given the current technical and fundamental backdrop, it’s quite likely crude trades in the $40 to $50 range for the remainder of this year.

However, I’d use any downturn into the lower end of that price range as a buying opportunity.  I’m noticing a number of important trends in the energy space that lead me to believe the recent $38 low in WTI won’t be broken.

As a result, a well-placed long position in crude (or a company producing it) will likely pay in spades as 2016 progresses.

What’s the easiest way to potentially capitalize on this situation?

Energy focused equity ETFs offer investors a relatively simple way to catch industry trends.

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: Commodity Trading

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.

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