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Hi Lou,

Listen to you everyday on AM640. Looking for some info on purchasing oil stocks.

John

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Hey John,

Thanks for the assignment and listening to AM640. Your request comes on the heels of a request from Adam for an evaluation of the crude oil market. On February 5, 2016 I published an analysis of West Texas Intermediate Crude, which I encourage you to review as part of your decision making process. Another point that I want to make is that the search for oil stocks covers a wide landscape.

There are integrated companies that explore for reserves, refine the crude oil, and sell gasoline through a network of retail stations. In addition you might want to consider small and mid cap producers, pipeline companies, trucking companies, as well as other service companies..

I will examine the S&P TSX Capped Energy Index (TTEN-I) as a point of departure. There are 44 companies in the index with the largest having a market cap of $39.12-billion and the smallest with $261-million. You should take a look at each of the companies in the index to see which ones fit your investor profile. Here is a link that will provide more information on the index.

A probe of the charts will help you begin the process of preparing for your bottom fishing expedition.

Desktop users click on image to enlarge

The three-year chart exhibits many of the same patterns we have seen many times when looking at individual energy stocks. A top in June of 2014 followed by a steady decline. In this case, the index breached the 50-day moving average in July followed by a break below the 200-day moving average in September. A death cross formed in mid October of 2014 leading to the lows touched in January of 2016.

Desktop users click on image to enlarge

The six-month chart pulls into focus the bounce off the lows in January as the moving average convergence divergence (MACD) and the relative strength index (RSI) generated buy signals. Make note of the resistance along the 50-day moving average that stopped the advance in its tracks as we came into the later part of the month.

At this time, there are no patterns to indicate that we can expect a trend reversal in the near term. To your question as how to purchase oil stocks I would say carefully and in time not at this time.

Next time, I will audit the charts for Pollard Banknote Limited (PBL-T) for Mario.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lou@happycapitalism.com.

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