Time to Shift to the Servicers
- Posted by Greg Harmon
- on February 21st, 2014
Crude Oil ($USO) has had a great run since early January, moving from over 10% on the West Texas Intermediate. The Oil Servicers ($OIH) have also done quite well rising about 8%. In fact the Servicers look that they could continue for quite some time if they can just go a little higher. The chart below shows the OIH is at resistance at 48. A level that has stopped it since Christmas. The RSI and MACD both are rising, supporting a break out. And a break out higher does not see
resistance again until 49.50 and then 51. Not a bad place to be. But Crude Oil looks good too, so why shift? It is the relative strength chart that gives an answer. The weekly chart below of the Servicers measured against Crude Oil shows the under performance with a falling ratio on the chart. But there are 3 reasons in that chart that suggest a shift from Oil to Servicers is warranted, at least for a trade. First the pullback is finding support, and for a prolonged period of time. Nearly a month. The other two reasons are about where that support is. It happens to be at both a 61.8% retracement of the move higher from the August 2013 low and at the 50 week Simple Moving Average (SMA). Using a stop under the the support ratio at 1.28 gives a good place from a risk reward perspective to try the reversal higher, if not just an OIH position outright.
Get my book, Trading Options: Using Technical Analysis to Design Winning Options Trades from Amazon.
Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through January 2014 Expiry and sign up here for the free 7 day trial before you pay.
If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.
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 since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
- The Case for Lower Longer via Pimco’s Tony Crescenzi
- Premium Earnings 9-28-16: Accenture and Conagra
- The German Situation
- Premium Earnings 9-27-16: Nike and Blackberry
- Australian Dollar is Back to Being a Commodity Currency
- The Debate, Gennifer Flowers and Match.com
- Top Trade Ideas for the Week September 26, 2016: Bonus Idea
- Top Trade Ideas for the Week of September 26, 2016: The Rest
- Top Trade Ideas for the Week of September 26, 2016: The Rest Premium
- Top Trade Ideas for the Week of September 26, 2016: The Best