Commodities Countdown

Oil Stocks Start To Rally

Greg Schnell

Greg Schnell

Chief Technical Analyst, Osprey Strategic

The Energy Sector spent the first six months of the year in the divorce section of most portfolios. Holding energy stocks was extremely painful while technology and biotech rallied. Most Commodities were pulling back for the first half and the associated stocks were as well. For those following the video recordings, we have been hunting for a seasonal low in energy stocks starting in early July. This looks like it is setting up.

This week some of the energy stocks on both sides of the border are pushing above one-month bases. While its not much, it is somewhat rewarding to see it start when we were expecting some seasonality to kick in.


Here is an example from Apache (APA). The SCTR has been below 15 for 5 months and has not broke the trend yet. Perhaps we could agree that an SCTR ranking above 25 would be a change in the SCTR trend. This is an area of the market that has been unloved, and a bounce from here would add some diversification. 

The Relative Strength downtrend in purple looks like its cracking and it wouldn't take much to get new 3-month highs. Price pushed strongly above the 50 DMA which has been a friction level since January of 2017.  The volume lately has been pretty good with lots of green volume bars lately and they are highlighted by the ellipse. This translates into positive On Balance Volume (OBV) in the bottom panel. Lastly, the MACD is in positive territory.

Agreed this chart is not out of the weeds yet, but three-month highs in OBV is a start.

The table below lists the Exploration and Production Large-Cap stocks and their SCTR rankings. From deeply oversold, there can be some nice reactions as the group tries to push above 30. 

An example of a chart as the SCTR starts to accelerate above 30 is below. When the SCTR starts to clear the previous few months highs, it looks more attractive as something is finally changing with the stock. In this example,  SCTR is at the highest level since the start of the year so that trend is changing. A close above $64 would be the highest close in five months.

On the Commodities Countdown 2017-07-20 video recording, I will be going through the stock lists looking for some nice setups in Oil and Gas but also other Commodity-related stocks.

You can catch all the video recordings on the Vimeo Channel. If you would like to be notified when a new article goes up, click the gray 'Follow' button on the right-hand-side. You can also click Notify Me on the bottom of this article to get new articles into your inbox as soon as they are uploaded.

I think the huge opportunity in Commodities is starting to take shape. Whether it has the legs to continue is a more difficult question. If we haven't put trades on, the whole thing just moves away without us on board.

Good trading,
Greg Schnell, CMT, MFTA.

 
 
Greg Schnell
About the author: , CMT, MFTA is Chief Technical Analyst at Osprey Strategic specializing in intermarket and commodities analysis. He is also the co-author of Stock Charts For Dummies (Wiley, 2018). Based in Calgary, Greg is a board member of the Canadian Society of Technical Analysts (CSTA) and the chairman of the CSTA Calgary chapter. He is an active member of both the CMT Association and the International Federation of Technical Analysts (IFTA). Learn More