Oil Servicers Set to Outpace the Commodity
- Posted by Greg Harmon
- on January 24th, 2011
Anything Oil related has been on fire the last 2 months. I have been on the record calling for $120/barrel in early December and from 148 – 167 longer term in my year end review. That view has not changed. But now may be the time to shift away from Oil and start to focus on the oil services stocks instead.
Below is a ratio chart of the Oil Services Holders ETF (Ticker: OIH) against the United States Oil Fund (Ticker: USO) on a weekly timeframe.
This ratio has been in a slowly rising wedge since the beginning of 2009. Recently there has also been a steeper rising channel within that wedge. But last week the ratio cracked above the wedge. And this week has started with a confirmation of that break. Along with those recent changes the Moving Average Convergence Divergence (MACD) indicator is also starting to improve again, with the Relative Strength Index (RSI). A continuation of the steeper rising channel confirms money better placed in the servicers.
If you do not like the ETF then the two best components within the OIH from a technical analysis perspective are Halliburton (Ticker: HAL) and Nabors Industries (Ticker: NBR). Below is the chart for HAL.
The chart of HAL shows a rising channel since June but recently price action has been sideways since the beginning of December. What makes it promising is that the RSI has bounced off of support at the same level that started previous runs higher within that channel and the MACD is improving and looks like it might cross very soon. On a measured move look for a target of 49 or higher by the end of March on the next leg up.
The chart for NBR below shows that it also has been moving sideways, bouncing off of support at the 21.67 area since early December. The RSI is holding near the 50 level and during the consolidation the MACD has been improving, and its components are showing signs of turning higher towards a cross again, but from a near zero level this time and not descending. If the MACD does turn then this can rise again and test the resistance at 24.10. With positive reinforcement from the RSI and MACD it could see 30.50 by May Day on a measured move if it can break that resistance.
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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