In our article on HERE on March 24th we highlighted how it is possible to connect the Technicals of Crude Oil and connect that with specific oil sensitive stocks. What was clear was that Crude oil was approaching a major zone of support which meant that the downside was limited in Oil stocks.
This past week has seen a dramatic shift in the dynamics of Crude and therefore stocks that needs to be updated. Looking at Crude itself the chart shows that went back to previous weeks lows and reversed sharply higher, with out reaching that zone. Whilst unfortunate, the rally has been of sufficient velocity to signal a potential change in trend.
The chart below has the Range Relativity Study applied. This is one of our core indicators in understanding current trend, changes in trend and overextension that create sweeping reversals. This was covered in our educational blog HERE
The picture below is a half day chart of Crude Oil Futures. Black lines represent weekly range, blue monthly, pink quarterly, brown semi annual and red annual. These values are fixed at the beginning of each relevant period and therefore provide a forward set of reference points. The key take away is that price closed above the Weekly High Pivot as shown by the circle. This was the first bullish reversal since November last year which the second chart highlights.
Price, Time and Space are what are analysis focus’s, which means that end of months and quarters are of particular relevance. SplitC (Time Area2 in other platforms) and Splits (Time Area 1) measure relationships between previous Months (Blue), Quarters (Pink), Semi Annual (Brown), and Annual (Red). They step up or down according to prior price action and indicate multiple timeframe trends and support and resistance points.
SpliC shows that all timeframes up to quarterly have moved to the same price at $50.85 whilst the next two higher timeframes remain fixed at previous points at $55.55. This opens up Space for price to rally. At the same time Splits has all levels below current price apart from quarterly at 51.95. On the chart itself we have a confluence between 51.95 and weekly Energy resistance at 52.08. Move beyond there and there is another confluence with the next weekly level at 55.51 and the SplitC targets at 55.55.
This is very neat and means there are crystal clear reference points for where crude can rally to.
With the positive vibe confirmed on Crude Oil we can now look at some individual sectors and stocks that have exposure. In contrast to Crude Oil itself the Oil and Gas Drilling sector slumped last week dropping from 93 to 184 out of total list of 197 sectors. However, going through the charts shows that the slump was based on market analysts downgrading the sector in a big way and definitely NOT price action.
Generally, these analysts sense of timing is poor and has little bearing on what the stocks will do. So what we have here is classic Bad News Good Action which is one of my favorites. Our next upcoming book which is being printed now has a couple of chapters on exactly this area.
As well Range Relativity the charts also have our Energy and Expansion support and resistance points as solid lines.
Here is a run through. Helmerich and Payne (HP) were mentioned in a previous article and you can see a Relativity based zone of support. Friday saw a close above the Weekly high and is the most positive in terms of being exposed to oil.
In contrast Transocean (RIG) held quarterly support (Purple line and a common theme) but did not close above the weekly.
Patterson (PTEN) also posted a positive reversal when overextended but has a monthly Expansion level not that far above so has some resistance to breach as circled.
Nabors (NBR) also held quarterly support and posted a weekly reversal whilst Ensco (ESV) and Diamond Drilling (DO) did the same.
Rowan (RDC) was way below its quarterly so most overextended. It just held a major monthly support but then stopped directly on Friday at a monthly a resistance point.
Noble (NE), Seadrill (SDRL), and Precision Drilling (PDS) reversed.
It is important to differentiate and smaller caps like Atwood Oceanic’s (ATW) and Pioneer Energy (PES) did not post positive signals.
It is also possible to analyse ETF’s and XOP has the highest exposure to this sector. The day of the lows last week saw one of our Divergence indicators POPS indicate a bullish turnaround (green triangle circled). It was also close to a monthly Energy support point.
If one of patterns (Ufo, Pops, BullWhip, BearCage, PowwerPlay, and SlammDunk) appears at Energy or Expansion levels the Trade Safely system activates and sets off the sequence of how a trade can be managed.
We hope you have found this Crude Oil with Energy Stocks, Etfs usefull. Click on the image below to get a 30 Day free Trial of our Software and Service that was used to generate this analysis.
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