What are we looking for?
A couple of weeks ago, we looked at Canadian-listed energy stocks with long-term upside potential, based on four technical indicators. Today, let's do the same with their U.S.-listed counterparts.
The screen
We limited our pool to the senior U.S. energy stocks in the S&P 500 index.
To find the most promising, we looked at each stock's moving average. This is the average closing price for the stock over a recent period, usually the past 10 weeks (10wMA) and past 40 weeks (40wMA). Charting the moving average week by week gives us a sense of investor's behaviour: Are they growing more (or less) enthusiastic about the company's outlook, and are they more (or less) likely to purchase the stock?
We started by selecting only those stocks that have rising 40wMAs and rising or flat 10wMAs. We then narrowed our search by choosing only the ones with positive stochastic and/or on-balance volume (OBV) indicators.
The stochastic indicator measures investor's activity. It looks at today's range (defined as today's high minus today's low) and compares it with the average range of the previous five days. A positive signal is generated whenever today's range is higher than the previous five-days' average. This suggests that buyers are willing to pay more for the stock than they did during the last five days and/or shows a positive trend.
On-balance volume (OBV) is used to detect momentum. Volume should keep pace with price; each $1 rise in price should be accompanied by a commensurate rise in volume. A rise in price on lesser volume would suggest a negative signal for the stock.
What did we find?
We found seven stocks that satisfy all four criteria and seven that had three positive readings, suggesting a possible small correction before the resumption of their up-trend. In the table below we summarize our findings.
Ron Meisels is the Director of Research and Monica Rizk is the senior Technical Analyst for Phases & Cycles Inc. (www.phases-cycles.com). They may hold shares in companies profiled.