Oil Stocks (PBR, SLB, PSX) And ETF (USO) Outlook

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The price of oil plays a key role in many industries, and has the potential to impact stock prices. Yet not all oil sector stocks are directly related to the price of oil, and often have their own technical outlooks and opportunities, independent of what the price of oil is doing. Looking first at the price of oil, as represented by an exchange traded fund (ETF), we will then look at three major oil stocks from varying industries relating to the oil sector.

 

 
United States Oil (ARCA:USO)
 
 

The United States Oil (ARCA:USO) stock rose in July and August, but stalled and pulled back in mid-September. Resistance is at $35 and support at is $32.50 – the price range the ETF has been in since September 19. A breakout of that range indicates the short-term direction of the ETF. A rally above $35 points to a move towards $36, and if the ETF can keep rallying through $37.17 (September 14 high), it signifies that the ETF is in the midst of a longer-term uptrend. On the other hand, a drop back below $32.50 is bearish, with the potential to move to the $29.02 June low, and possibly lower as the longer-term downtrend since March continues.

SEE: Technical Analysis: Support And Resistance

 

 

Petroleo Brasileiro S.A-Petro (NYSE:PBR)
 
 

Petroleo Brasileiro S.A-Petro (NYSE:PBR), the large Brazilian drilling and exploration company, fell aggressively from the 52-week high of $32.60 in February to a $17.27 52-week low in June. Since the low though, the stock has been pushing higher and is currently within a flag formation – traditionally a continuation pattern. Since mid-September the stock has had little volatility as it moves sideways with a slight downward bias. A breakout above that sideways range (flag) at $23.70 indicates another pop higher in the stock, with a target of $26 to $26.50. A sharp drop nullifies the flag pattern and is likely to be bearish since the long-term trend remains down.

SEE: Continuation Patterns: An Introduction

 

 

Schlumberger Limited (NYSE:SLB)
 
 

Schlumberger Limited (NYSE:SLB) is an oil and gas equipment and services provider which has been in a “ranging” mode going back to the latter part of 2011. Tapping out near $80 to $81, this is has been the area to short or sell the stock over the last year. A breakout above this region is likely to cause a buying surge though, with a target of $100. A good buy point for the range has been $60 to $65, but a drop below $59 could the send the stock toward $50.

SEE: The Anatomy Of Trading Breakouts

 

 

Phillips 66 (NYSE:PSX)
 
 

Phillips 66 (NYSE:PSX), an oil and gas refining and marketing company, has been rallying since May when it began trading. Since mid-September the stock has moved sideways in a tight range. The breakout of the range indicates the direction of the stock over the coming weeks and potentially over the coming months. A rise above $48.22 keeps the uptrend going, with a target of $52 or higher. If the price drops below $44, a fall toward support at $40 is probable. Dropping below $40 draws the overall uptrend in question.

 

 

 

 
Bottom Line:

All of the aforementioned oil related stocks are worth trading, but each come with a different trading opportunity. Traders should trade with an ideal trend, but trendlines as well as support and resistance can be used to determine when the tide may be changing. Due to the global nature of oil, oil stocks and ETFs can move quickly and aggressively, therefore, be aware of and always manage your risk.

 
Charts courtesy of stockcharts.com

At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.

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