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Oil Service About to Play "Catch-Up"

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The current S&P 500 rally to new all-time highs may very well be the beginning of a "bubble-like" move to much higher levels in the weeks and months ahead. However, make no mistake, there is a great deal of risk in being long many stocks at this juncture, but there are sectors/industries that haven't participated...and very well may be ready to do so given the trading patterns of the past two weeks.One such sector and/or industry is the energy sector (XLE), and in particular the oil service group (OIH).

OIH-SPY 5-4-13

Technically speaking, when we look at the relative OIH/SPY ratio, we find it at levels extant during 2012 and 2008, and we find the overall pattern a bullish multi-year wedge. Moreover, the longer-term 40-week stochastic is at oversold levels, which in the past have allowed for OIH to rally relative to SPY. Currently, prices stand at .27, but we look for a move towards the .42 level that in the past has proven to be major resistance.

Hence, if one needs or wants to be long in the current market environment, then OIH and its component stocks are the place to be.

Good luck and good trading,
Richard

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