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Energy Energized? WPX APA CNQ

ChartSmarter

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CMT, Chartered Market Technician

Group “Drilling” Lower:

  • There may be “sure things” in the market place, but the performance of the energy group may be as close as one can get. Below we see a chart of the annual performance of the major S&P sectors dating back 13 years (from Novel Investor), and it is easy to see just how dismal energy has been. Five of the last six years it has finished last or second to last of the 11 groups, and for eight years running the XLE has underperformed the S&P 500. “Value” players in this space have been decimated. In recent years there have been some high profile closures of funds with T Boone Pickens, Blenheim Capital, Andy Hall’s Astenback Capital just to name a few. From crude’s peak in 2008, a series of lower highs and lows has been in place, well before the US became the largest oil producer. This has had some positive effects, as prices at the pump collapsed, but has sentiment become just way too depressed and a strong dead cat bounce could be in the cards? Let us remember trends once in place are more likely to remain that way, than to reverse, so bet on the bounce to be short lived. Even with the XLE’s near 4% jump Wednesday, it is still the worst acting major S&P sector YTD down almost 9%, and one of just 2 of the 11 groups in the red in 2020 thus far.

Behemoth Blues:

  • Stocks will often overshoot to both the upside and downside. Perhaps we witnessed that with TSLA today with further weakness to come. On the opposite side of the spectrum but obviously not with the violence of the move lower is the chart of XOM below. The rubber band appears to be snapping back to the upside for this name today, but just how long can one expect this very nascent strength to persist? Of course no one knows for sure, but the trend here has certainly been lower as the XLE’s largest component now trades 25% off most recent 52 week highs. It endured an 11 session losing streak between 1/14-29, with all but one CLOSING at or well into the lower end of the daily range. The chart on a WEEKLY look has been in a downtrend since early 2014, where it met resistance roughly at the very round par figure. New technology has made the Peak Oil phrase shaky, but we may be looking at Peak Energy share prices that have been in place for some time. 

Special Situations:

  • Exploration leader lower by 8% YTD and 2% over last one year period.
  • Higher by 6.1% this week so far, looking to end 4 week losing streak that fell by a combined 16% (immediately preceding was 5 week winning streak that rose 38% weeks ending between 12/6/19-1/3).
  • Back to back positive earnings reactions of .9 and 11% on 10/31 and 8/6/19, after losses of 5.4 and 3.4% on 5/2 and 2/21/19.
  • Enter after initial touch of rising 50 day SMA after recent breakout.
  • Entry WPX here.  Stop 12.
  • Energy play higher by 13% YTD and lower by 12% over last one year period. Dividend yield of 3.5%.
  • Last 2 weeks fell by a combined 16.7% after a near doubling in price from week ending 12/6/19. Good former CLOSING support on WEEKLY chart at very round 20 number.
  • Most recent earnings reaction that jumped 9.9% on 11/1/19, came after FOUR straight losses of 1.2, 3.6, 1.1 and 3.8% on 8/1, 5/1, 2/28 and 11/1/18.
  • Enter on pullback into recent gap fill, and break above long WEEKLY downtrend.
  • Entry APA 28.50.  Stop 26.25.
  • Canadian energy play lower by 10% YTD and higher by 7% over last one year period (hard to find energy names up over that time frame). Dividend yield of 3.9%.
  • Since lows made last week of 2018, rare energy play that has made WEEKLY higher highs and lows. Still 11% from most recent 52 week highs offering opportunity.
  • Three of last four earnings reactions higher by 8.5, .4 and 2.4% on 11/7, 5/9 and 3/7/19.
  • Enter after recent retest of cup with handle breakout.
  • Entry CNQ 29.  Stop 28.

Entry summaries:

Buy after successful touch of rising 50 day SMA after recent breakout WPX here (12.65).  Stop 12.

Buy pullback into gap fill, long break above WEEKLY downtrend APA 28.50.  Stop 26.25.

Buy after recent successful retest of cup with handle breakout CNQ 29.  Stop 28.

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