Commodities Countdown

Looking For Leaders in Oil And Gas, Oil Services - Webinar 2016-04-21 HIghlights

Greg Schnell

Greg Schnell

Chief Technical Analyst, Osprey Strategic

With all of the oil stocks rallying this week, we have finally reached a place on the charts where they are testing major support and resistance lines. As promised, the majority of the presentation was reviewing the US Oil and Gas individual stocks as well as the oilfield service industry. 

"Commodities Countdown LIVE!" with Greg Schnell - 2016-04-21 17:00 from StockCharts.com on Vimeo.


From the webinar feedback, there was a high level of interest in the charts. Across the various comments, one struck me acutely. 'By working through an entire industry group all at once, it was helpful to understand how you review potential trading candidates and establish decision-making on getting in and exiting a trade.' You might find that the walk-through on various charts with a technical commentary to be more helpful than the specific ticker.

Through my twitter feed, I see various charts posted that have some sort of technical pattern building. One of the concerns I have is that when the stock is neither a leader nor a laggard, its trend seems whimsical and follows the direction of the index with varying degrees of correlation. I tried to address that specifically during the webinar. Stocks that are outperforming the index in price action, tend to trend better in my opinion. When entire industry groups are out of favor, the stocks tend to underperform and trend lower as a group. The stocks in the performance middle, neither leader nor laggard, just don't trend as well. For technicians, finding trending stocks early in the trend is the smoothest way to higher profitability in the trading account.

The webinar focused on the top 25% of the stocks in the oil and gas industry as well as the oil service industry.

Here are a few leaders worth keeping an eye on. If the market pulls back, these might give an opportunity to buy a little lower. However, in the case of gold stocks, people waiting for a pullback, never got one. We'll see if these oily names give us a lower buy point.  

Bill Barrett SCTR jumped up to 75 in early March. The stock continued to run another 60% since then. Now BBG is against major horizontal support and resistance. Anyone who bought below the blue line is profitable. Anyone who bought prior to the breakdown in June 2015 has great conviction if they are still holding the stock, but they are underwater on the investment at this point. 
If the market is a forward-looking indicator, seeing the crude drawdown this week and the failure of the oil price to drop even though there was no supportive news out of Doha probably indicates a major change in expectation. While we may oscillate with the price of oil somewhat, it is probable that the $26.05 low holds and the bottom is in and holds. I have been expecting a retest 3 or 4 months away from the original low. I am not sure if we'll get back down to test the low now. It might just be a retracement within the uptrend now.

We still have to deal with many oil and gas companies getting dragged into bankruptcy. That is widely expected to start in earnest as a Q2 event. However, I think the companies showing broad signs of strength here are more than likely the survivors and weak stocks at this point should be avoided. Stocks that have been unable to rally are more likely to be avoided for a reason.

Another good looking chart is CNQ listed on the NYSE. While oil is important, the recent push in Natural gas this week is also supportive. Companies like CNQ who have a good split between the different products are currently finding lift from both Oil and Gas.

Murphy Oil is just poking above the resistance area this week. After the SCTR spiked above 75 and then pulled back, it is usually a great sign when it can return above 75 with earnest. 

I am not convinced the large cap integrated companies will be the best performers coming out of the base. Chevron is one exception. They have a lot of new volume coming on stream this year if I am not mistaken. But that is getting into the fundamentals. The chart suggests something great is happening there. While the SCTR is over 90, there were 17 stocks in the oil and gas area ranking ahead of this nice looking chart!

To view the top oil and gas producers, I would encourage you to watch the video. Commodities Countdown 2016-04-21. You might also find some chart settings that you like!

There are some oilfield service stocks that look ready to move.

Helix is setting up nicely. Look at the volume surge in the zoom panel. Nice to see. Some up days have 50% higher volume. That has to be institutional activity!

This next chart (Fairmount Santrol) really built a nice head/shoulders base pattern. The breakout on Thursday...nice! They make unique 'proppants' for the oil and gas industry. 

This next stock is a midstream company (DCM) that pays a 9% dividend and looks set to generate some capital growth as well.

On the charts above, the 'dividend' boxes at the bottom are shown by selecting 'Events' in the chart overlays tool. I have not checked to see if there has been a dividend adjustment since the last one, so you may wish to check. Click on the chart to see the settings below.

There are lots of good trade ideas on the webinar. I have randomly picked a few here. The sector is gushing with great charts and lots of momentum. The Commodities Countdown 2016-04-21. How you choose to enter is your choice but the breadth of the move suggests this is just getting started. If it pulled back for a few weeks it might create better entries. On the big picture, commodity related moves can easily jump 30-40% especially when the companies have collapsed the corporate overhead costs. I would encourage you to look into the sector now.

Please click on the yellow box below to get these commodity-related Commodity Countdown blogs sent directly to your inbox. Also, you can follow me on Twitter @Schnellinvestor.

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