Crude Oil is Down Big, Let’s Shop for Oil Companies
- Posted by Greg Harmon
- on June 16th, 2011
With West Texas Intermediate Crude (WTIC) off nearly 17% from its highs in late April, it makes me think about my wife. She cannot pass up a bargain. Now may be the time to look for some bargains in the big oil company stocks. After all with stocks like Exxon Mobile (ticker: $XOM) and Chevron (ticker: $CVX) off almost 10% and Hess (ticker: $HES) off nearly 20% there must be some bargains out there right? Let’s take a look.
The weekly chart for Chevron has shown a steady decline since late April, and there does not look to be any indication that will change soon. The price has been steadily marching lower, the Relative Strength Index (RSI) continues to trend lower and the Moving Average Convergence Divergence (MACD) indicator is steadily growing more negative. It has fallen through the 20 week Simple Moving Average (SMA) and looks to have support next at around 95 with 92.50 and the 50 week SMA at 89.49 below that. Maybe another 10% downside. I guess not that one.
What about Exxon Mobil? This weekly chart also shows a steady decline in price and RSI with MACD growing more negative. Support lower on this stock looks to come at the 73.50 level from 2009 and then 71.00 below that. Another stock with potential for 10% more downside. These two are mega cap stocks that trend. Like an aircraft carrier they cannot turn on a dime. With a ton of shares outstanding they look to be a good short opportunity. Hmm, we went shopping and are now trying to sell more product to the store.
Hess is a bit further along, down 20%. Although it’s weekly chart has many of the same crappy characteristics as Chevron and Exxon Mobil. It s price, RSI and MACD all are pointing lower. What is a little bit different about Hess is that it is sitting near the cross of the 50 week and 200 week SMA, coinciding with previous support from November 2010 and it is falling out of the Bollinger bands. It still looks too ugly to buy, even at this 20% off price, but as part of a pairs trade against either of the other two stocks it makes a lot more sense. A move under 68 would change that.
Hold out shoppers, just like the department store, the discounts look to keep growing. I wish I could get my wife to think that way.
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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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