Black Gold Push?

  • As the XLE looks to build on some momentum from the recent election, as the president-elect should be a friendlier administration to the group, it pays to look for opportunities within. The daily chart of the XLE does trade a bit wide and loose for my liking, but notice on the ratio chart how since the start of November is pushing gently ABOVE a bearish head and shoulders pattern against the S&P 500 and we know from FALSE moves often come fast ones in the opposite direction. It will likely feel a magnetic pull toward the very round 100 number into year-end as it is now showing a base-on-base pattern with back-to-back double bottoms. A major player in the fund that will have an enormous impact on it is the daily chart below of CVX. It is now above a bull flag but may feel some pressure with the second straight spinning top candle today and bearish engulfing candle last Wednesday. I think it makes sense to buy a pullback into the latest gap-up from the 11/6 session. If one zooms out and looks at the MONTHLY chart, they would see some solid overall digestion since the last couple of years, after a big 2021 run. On the MONTHLY ratio chart, it has lagged XOM for almost 4 years now the exact opposite of the 2016-2021 time frame. Time for some outperformance against its giant rival in 2025?

Equipment Check:

  • As we have mentioned energy is likely headed higher and this chart showing all 11 of the major S&P sectors shows that it is likely to record its second straight year in the cellar of the leaderboard (notice it has a strong tendency to finish at the top or bottom of the list as it looks like for the ninth year of the last 10 it will be either the best or worst of eleven). Will 2025 rebound and be one of the best? Of course, no one knows and inside the space, the equipment and exploration names often vy for attention. Below is the daily chart of the OIH and if there is a flood of energy released onto the marketplace with the "drill baby drill" mantra in effect it may put a lid on PRICE for explorers but equipment may be in a sweet spot in that type of environment. It completed a bullish island reversal on 11/6 jumping 9% (after the gap down on 10/15) and if this can catapult the 200-day SMA it could be a beach ball held underwater breakout. The WEEKLY chart is setting up, but I want to see a firm week this week as the last 2 weeks that scored big gains of 7% the weeks ending (circled) 9/20 and 10/4 showed zero follow through. Last week screamed higher by 10% in the best WEEKLY volume since the week ending 3/17/23. If it follows through this week a 340.14 double bottom trigger comes into focus. Notice how bearish engulfing candles (squared) the weeks ending all called the near term tops the weeks ending 9/22/23, 4/12 and 8/2.

Recent Examples:

  • Market participants need to be flexible and not hold onto cemented beliefs about their positions if something changes. For me as a technician that would constitute PRICE action. A good example of that is the daily chart below of OXY and how we looked at it in our 9/17 Energy Note. I did think a touch of its 200-day SMA was going to be a decent risk/reward entry on a Buffett play (who went into cash heavily before this tremendous rally). But my opinion on the name has changed as it has not traded in unison with a group that seems to now have some wind behind it. The updated chart here now shows a bearish head and shoulders pattern with its neckline at the very round 50 number. It is now 29% off most recent 52-week highs and WEEKLY chart shows rejection at round 70 number was a bearish evening star pattern with doji candle in middle from week ending 4/12. Now below 200 WEEK SMA although bulls may state bullish inverted hammer last week. This is hard to play just before earnings Tuesday after the CLOSE but I have changed my sanguine approach on the play.

Special Situations:

Cactus:

  • Oil equipment play up 52% YTD and 55% over last one year period. Dividend yield of .8%.
  • Name 1% off most recent 52-week highs and MONTHLY chart shows nice break above cup base pivot of 62.72 in July from a pattern that was more than 2 years long. Notice it digested huge move between from 7 to above 60 from 2020-22.
  • Earnings reactions mostly higher up 3.5, 3.6, and .5% on 10/31, 5/2, and 2/29 and fell 1.8% on 8/1.
  • Enter on pullback into break above bullish ascending triangle.
  • Entry WHD 67.50. Stop 63.

Range Resources:

  • Energy exploration play up 13% YTD and 5% over last one year period. Dividend yield of .9%.
  • Name 12% off most recent 52-week highs and MONTHLY chart shows long bull flag formation that started at a one handle, not a typo, and break above 37 would be a move above 200 MONTH SMA as well. Breakout there would carry measured move to 73.
  • Earnings reactions mixed up 3.5 and 3.2% on 10/23 and 4/24 and fell 3.9 and 3.4% on 7/24/and 2/22.
  • Enter on pullback into break above bullish ascending triangle.
  • Enter RRC 33.75.  Stop 32.

Petrobras:

  • Brazilian energy giant down 15% YTD and 11% over last one year period. Dividend yield of 17.5%.
  • Name 24% off most recent 52-week highs and MONTHLY chart shows name has advanced just 3 times thus far in 2024 but is sporting a bull flag dating back to COVID lows. Move above 14.50 could carry a potential measured move to 27.
  • Earnings reactions mixed with gains of 1.5 and .2% on 11/8 and 8/9 and fell 2 and 11.5% on 5/14 and 3/8.
  • Enter on pullback into bullish island reversal.
  • Entry PBR here.  Stop 12.60.

Good luck.

Entry summaries:

Buy pullback into break above bullish ascending triangle WHD 67.50.  Stop 63.

Buy pullback into break above bullish ascending triangle RRC 33.75.  Stop 32.

Buy pullback into bullish island reversal PBR here.  Stop 12.60.

 

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Black Gold Push?

  • As the XLE looks to build on some momentum from the recent election, as the president-elect should be a friendlier administration to the group, it pays to look for opportunities within. The daily chart of the XLE does trade a bit wide and loose for my liking, but notice on the ratio chart how since the start of November is pushing gently ABOVE a bearish head and shoulders pattern against the S&P 500 and we know from FALSE moves often come fast ones in the opposite direction. It will likely feel a magnetic pull toward the very round 100 number into year-end as it is now showing a base-on-base pattern with back-to-back double bottoms. A major player in the fund that will have an enormous impact on it is the daily chart below of CVX. It is now above a bull flag but may feel some pressure with the second straight spinning top candle today and bearish engulfing candle last Wednesday. I think it makes sense to buy a pullback into the latest gap-up from the 11/6 session. If one zooms out and looks at the MONTHLY chart, they would see some solid overall digestion since the last couple of years, after a big 2021 run. On the MONTHLY ratio chart, it has lagged XOM for almost 4 years now the exact opposite of the 2016-2021 time frame. Time for some outperformance against its giant rival in 2025?

Equipment Check:

  • As we have mentioned energy is likely headed higher and this chart showing all 11 of the major S&P sectors shows that it is likely to record its second straight year in the cellar of the leaderboard (notice it has a strong tendency to finish at the top or bottom of the list as it looks like for the ninth year of the last 10 it will be either the best or worst of eleven). Will 2025 rebound and be one of the best? Of course, no one knows and inside the space, the equipment and exploration names often vy for attention. Below is the daily chart of the OIH and if there is a flood of energy released onto the marketplace with the "drill baby drill" mantra in effect it may put a lid on PRICE for explorers but equipment may be in a sweet spot in that type of environment. It completed a bullish island reversal on 11/6 jumping 9% (after the gap down on 10/15) and if this can catapult the 200-day SMA it could be a beach ball held underwater breakout. The WEEKLY chart is setting up, but I want to see a firm week this week as the last 2 weeks that scored big gains of 7% the weeks ending (circled) 9/20 and 10/4 showed zero follow through. Last week screamed higher by 10% in the best WEEKLY volume since the week ending 3/17/23. If it follows through this week a 340.14 double bottom trigger comes into focus. Notice how bearish engulfing candles (squared) the weeks ending all called the near term tops the weeks ending 9/22/23, 4/12 and 8/2.

Recent Examples:

  • Market participants need to be flexible and not hold onto cemented beliefs about their positions if something changes. For me as a technician that would constitute PRICE action. A good example of that is the daily chart below of OXY and how we looked at it in our 9/17 Energy Note. I did think a touch of its 200-day SMA was going to be a decent risk/reward entry on a Buffett play (who went into cash heavily before this tremendous rally). But my opinion on the name has changed as it has not traded in unison with a group that seems to now have some wind behind it. The updated chart here now shows a bearish head and shoulders pattern with its neckline at the very round 50 number. It is now 29% off most recent 52-week highs and WEEKLY chart shows rejection at round 70 number was a bearish evening star pattern with doji candle in middle from week ending 4/12. Now below 200 WEEK SMA although bulls may state bullish inverted hammer last week. This is hard to play just before earnings Tuesday after the CLOSE but I have changed my sanguine approach on the play.

Special Situations:

Cactus:

  • Oil equipment play up 52% YTD and 55% over last one year period. Dividend yield of .8%.
  • Name 1% off most recent 52-week highs and MONTHLY chart shows nice break above cup base pivot of 62.72 in July from a pattern that was more than 2 years long. Notice it digested huge move between from 7 to above 60 from 2020-22.
  • Earnings reactions mostly higher up 3.5, 3.6, and .5% on 10/31, 5/2, and 2/29 and fell 1.8% on 8/1.
  • Enter on pullback into break above bullish ascending triangle.
  • Entry WHD 67.50. Stop 63.

Range Resources:

  • Energy exploration play up 13% YTD and 5% over last one year period. Dividend yield of .9%.
  • Name 12% off most recent 52-week highs and MONTHLY chart shows long bull flag formation that started at a one handle, not a typo, and break above 37 would be a move above 200 MONTH SMA as well. Breakout there would carry measured move to 73.
  • Earnings reactions mixed up 3.5 and 3.2% on 10/23 and 4/24 and fell 3.9 and 3.4% on 7/24/and 2/22.
  • Enter on pullback into break above bullish ascending triangle.
  • Enter RRC 33.75.  Stop 32.

Petrobras:

  • Brazilian energy giant down 15% YTD and 11% over last one year period. Dividend yield of 17.5%.
  • Name 24% off most recent 52-week highs and MONTHLY chart shows name has advanced just 3 times thus far in 2024 but is sporting a bull flag dating back to COVID lows. Move above 14.50 could carry a potential measured move to 27.
  • Earnings reactions mixed with gains of 1.5 and .2% on 11/8 and 8/9 and fell 2 and 11.5% on 5/14 and 3/8.
  • Enter on pullback into bullish island reversal.
  • Entry PBR here.  Stop 12.60.

Good luck.

Entry summaries:

Buy pullback into break above bullish ascending triangle WHD 67.50.  Stop 63.

Buy pullback into break above bullish ascending triangle RRC 33.75.  Stop 32.

Buy pullback into bullish island reversal PBR here.  Stop 12.60.