What are we looking at?
U.S. energy stocks with long-term upside potential.
Following our look earlier this month at major Canadian players in this sector, today we limited our pool to the 10 energy stocks in the S&P 100 Index.
To find the most promising, we looked at each stock’s 40-week moving average (40wMA). This is the average closing price for the stock over a period of 40 weeks. 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 selected only those stocks that are trading above their rising 40wMA.
Stocks tend to stay relatively close to their 40wMA. When stocks rise far above this average, investors often use this as an opportunity for profit taking, which then leads to a price correction toward the 40wMA. Sometimes, however, the demand for a stock could be so extensive that the price does not pull back to the average, but rather stays within a horizontal price range and, over time, the average catches up to the price.
What did we find?
We found nine out of the 10 that are in a long-term up-trend and trading above their rising 40wMA (National Oilwell Varco missed the cut).
Among these nine, Chevron, Exxon Mobil and Occidental Petroleum only recently started their new up-leg from a large trading range and therefore they are near an ideal point for accumulation. The others are somewhat extended and could either pull back or trade in a horizontal range for a period of time until their respective 40wMAs get closer to the price, but they should also be considered for later accumulation.
In general, the smaller the gap, in terms of percentage, between the current price and the average, the better the entry level for investors. Therefore, Exxon, Chevron and Occidental Petroleum with 7 per cent, 9 per cent and 6 per cent respectively, have the least downside risk at this time; Halliburton, Devon Energy, Anadarko Petroleum and ConocoPhillips have greater risk in the short-term, as these are currently the most overbought. Only a sustained decline below their respective 40wMAs would alter the long-term outlook for these stocks.
In the adjoining table we summarize our findings.
For a more detailed list covering all the energy stocks listed on a larger pool of U.S. energy stocks please go to http://www.phases-cycles.com/en/ and select “trial subscription”.
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.
U.S. energy stocks
|Company||Ticker||$ Price (June 24)||40wMA||% to average|
|Devon Energy Corp.||DVN-N||77.57||64.50||-17%|
|Exxon Mobil Corp.||XOM-N||102.73||96.00||-7%|
- Exxon Mobil Corp$90.26+0.59(+0.66%)
- Occidental Petroleum Corp$76.17+0.05(+0.07%)
- Anadarko Petroleum Corp$52.09+1.85(+3.68%)
- Apache Corp$57.91-0.34(-0.58%)
- Chevron Corp$101.77+1.58(+1.58%)
- Devon Energy Corp$36.44+1.95(+5.65%)
- Halliburton Co$42.45+1.03(+2.49%)
- Schlumberger NV$77.91+2.29(+3.03%)
- Updated May 25 4:00 PM EDT. Delayed by at least 15 minutes.