Thoughts on Energy and Stock Picks Within

Last week I posted a chart of Crude Oil on StockTwits. I said that I feel that it is in the process of bottoming/has bottomed. I strongly feel this way. The Commodity Index looks like a very similar bottom/bottoming process as well (granted it is heavily oil skewed).

Crude:
crude.png

Commodity Index:
dj-ubs comod.png
(Note: I cannot find the CRB index on TradingView)

Look alike right? I see inverse head and shoulder bottoms. 14 day RSI has yet to reach overbought, which makes me cautious about entering any new positions as the trend has not changed yet.

So these charts alone led to me digging through hundreds of energy related charts. I found a handful that I found really interesting. Before I get to those I want to show the 3 popular energy related ETFs, as my stock pick finds come from these sub-sectors.

XLE:
xle.png
Struggling with clear resistance as well as the 38.2% extension from the crash. We have yet to reach overbought, but I feel there is strength here as the right shoulder is not coming down to be filled in. I view this as strength similar to a specfic stock following a breakout where it has no interest in coming back down to retest the breakout level.

XLE/SPY:
xle:spi.png
Digging deeper, XLE relative to SPY looks like it wants to mean revert.

XOP: xop.png
Found support on 2008/2009 lows with an inverse head and shoulders being built.

XOP/SPY:
xop:spy.png

OIH:
oih.png
Not as clear a chart as Crude or XOP, but I like that we are building a pretty inverse head and shoulders under a key support area and below an important trendline.

OIH/SPY:
Screen Shot 2016-10-16 at 9.57.15 AM.png
Definitely weaker relative to SPY than XLE or XOP.

XOP/XLE:
Screen Shot 2016-10-16 at 10.03.18 AM.png
Exploration & Production outperforming XLE with a nice deep, defined, and already broken out inverse head and shoulders.

OIH/XLE:
oih:xle.png
Oil Services does not have this pattern now when we look at it relative to XLE. Not as strong.

I love digging deeper with relative strength analysis because I do not have unlimited capital so I need to make sure that which I put to work provides me with the most return. In bull markets, many stocks go up, but there are those which double and triple performance of the rest. Finding those keeps me coming back every day.

Many energy charts are in the middle of nowhere. The ones following look like they have bottomed to me. Here are my top energy picks, in no particular order:

TDW:
Screen Shot 2016-10-16 at 11.02.48 AM.png
Double bottom on the monthly chart that goes back to 1986. RSI has double bottomed as well. Lots of capitulation volume? 38% short interest.

CRR:
crr.png
Double bottom at 1999 prices with RSI never reaching oversold despite a 93% drop from 2014. 38% short interest.

CRK:
crk.png
Not a perfect double bottom with 1991 prices because we did slightly break below, but have ripped higher since. False breakdown? Huge buying volume. 16% short interest.

DO:
do.png
Bottoming with 2002-2004 prices. Dipped below but have continued to close above. Bullish RSI divergence.

DNR:
dnr.png
Double bottomed with 1999 prices and has held above. Building another base now. 20% short interest.

PQ:
Screen Shot 2016-10-16 at 11.26.00 AM.png
Bottomed with 1999 and 2003 prices. Dipped under but working its way back above. Big buying volume ticks.

RIG:
Screen Shot 2016-10-16 at 8.50.59 PM.png
A continous theme here as you can see. Weakest RSI strength, but giving it some time. 29% short interest.

WLL:
wll.png
Not the best double bottom, but a potential inverse head and shoulders under the 2000 lows with monster volume changing hands. Fell 91%. 25% short interest.

UNT:
Screen Shot 2016-10-16 at 8.47.31 PM.png
Clear inverse head and shoulder forming under 2009 lows, acting as the neckline. 13% short interest. Highest RSI level among all the charts.

SGY:
Screen Shot 2016-10-16 at 8.49.11 PM.png
SGY had a big rip this year above the 2009 lows, which it has gone back below, but I still like it. This has huge buying volume ticks and a nice 39% short interest.

PBR:
Screen Shot 2016-10-16 at 8.54.56 PM.png
This one is already up and off its 2002 double bottom. It never hit oversold. It’s on the receiving end of the relative strength out of Brazil. I think it continues.

PDCE:
Screen Shot 2016-10-16 at 8.53.24 PM.png
The only one that isn’t bottoming. I like the clear resistance above. 14% short interest.

Last but not least, REN:
Screen Shot 2016-10-16 at 9.18.55 PM.png
Now this one is interesting. I am not advising a position now, nor do I have one. What we’ve seen in this name coupled with the volume and a still 25% short float makes me believe it can continue to go a lot higher. Add crude outperformance to the mix and it might be a homerun. Thats all for I got for now because this chart makes me upset. I came across in it June and had it in my watchlist, but it got hidden within and ran to quick for me to catch. Talk about a homerun trade.

I don’t take short interest into consideration when picking stocks, but to me its fuel to the fire especially considering how well these risk/rewards are set up.

Will certain energy companies be in trouble soon? Sure. But not everyone associated with energy. I also only care about the charts. I see too many good risk/reward scenarios to ignore. I am not betting the farm on these to all act like REN in a a month but in a year to two to three, I think these will post monster percentage gains.

Thanks.

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