Energy Sector: buy or avoid?

Keith mug

The energy sector has been tossed around a bit, given geopolitical events in Russia and Iraq . Geopolitical events, BTW, has been the “catch phrase” of the past decade – for obvious reasons.

Below are some mid termed and short termed charts for WTIC and Nat. Gas. The second “season” for energy stocks is upon us—the first and more powerful of the two best times to own energy securities having ended in May. Energy tends to have a better than average return between late July and early October. I did mention a couple of energy stocks on BNN last night, including adding one as a “top pick”.

Here is the link to my Globe & Mail article regarding the top picks: http://www.bnn.ca/News/2014/8/19/Keith-Richards-Top-Picks-Unilever-Enerplus-Energy-Cash.aspx

Here is the link to the video clip for the show: http://www.bnn.ca/Video/player.aspx?vid=419800

BTW—I was privileged to receive a BNN coffee mug from host Michael Hainsworth. I’m telling you, these things are coveted like gold (actually, gold is less attractive as an investment than a BNN mug these days!) by us BNN guests – I’m afraid to drink from it lest I spoil the finish! Here’s a “mug shot”!

oil long

I’ve presented this long termed chart (above) with the large symmetrical triangle on this blog many times before. Oil is currently nearing the bottom of the triangle. That may be a time to buy, but only if we see some strength show on the daily chart (below). At this point, the daily chart shows us that oil is oversold, but the momentum indicators that I watch (RSI, MACD, stochastics) are not yet hooking up. Moneyflow remains bearish (top and bottom panes). For that reason, I am focusing only on individual names within our ValueTrend platform at this time.

oil short

Natural gas has retreated, but is showing signs of bouncing off of a trendline on the longer termed chart, below. Should the market drive it up from here, our target would be $5. Moving averages are still bearish on the daily chart, but there are some signs of life as the momentum indicators attempt to bounce off of their low points. Moneyflow is also showing some signs of a turnaround. It’s early yet, but Nat Gas may be ready for a rally.

nat gas long

All in, we’re selectively holding two stocks (10% of our portfolio) in oil and natural gas companies within our ValueTrend portfolio. Both are covered on the BNN show from last night.

nat gas short

As always, please post your comments below. I’m particularly interested in knowing what sectors readers are interested in . While I don’t like to cover too many individual stocks on this blog (unless they are very widely held), a broad sector coverage is usually of interest to a large number of readers. Please feel free to comment on any ideas you would like covered within sectors, or international markets.

12 Comments

  • If we break to new high’s on the S&P 500 (previous highs of 1991.39) would this not be confirmation of an ABC pattern that could target of 2080?

    Reply
    • I’m not an Elliott guy Dave, so I don’t really assign targets based on waves. But, hey, whatever method that works for you, I say go for it!
      At this time, I’m just guessing that the trend will remain up for some time, despite the probability of a bit of chop over the next month or two.

      Reply
  • Hi Kevin,
    I’m following the Nat gas sector as well as oil, so thanks for your insights in these sectors. I was wondering if you could address the Telecom sector as it usually is a seasonal and somewhat more defensive area at this time.

    Thanks,
    Ron

    Reply
    • Will do, thanks for the idea–by the way, its Keith, not Kevin. But that’s ok, lots of people sometimes call me “Richard”
      As someone said, “you can call me Kevin, you can call me Richard, just don’t call me late for diner”.

      Reply
  • Thanks Keith for the oil and gas charts. Canadians love the energy sector given all the resources we have in Canada.

    I would be interested in your take on the agriculture sector.

    Regards,
    Eric

    Reply
  • Sorry, I know your name is Keith…don’t know why I typed Kevin. Cheers!

    Reply
    • Too funny–not to worry Ron.
      Tell you what, I’ll call you Randy, you call me Kevin. We’re even!

      Reply
  • KEITH,

    WATCHING STOCKS ON BREAKOUT AS KINDER MORGAN (KMI-N) OR RONA (RON-T) RECENTLY, I ALWAYS RECALL LARRY BERMAN SAYING TO WAIT FOR A PULLBACK IN ORDER TO BUY. KNOWING WHAT A PARABOLIC RISE IS, DO YOU AGREE ON THAT STRATEGY THAT ONE SHOLD BUY BACK ON BREAKOUT POINT?

    Reply
    • KMI is pulling back to its breakout point now, so it may present a good entry point now or soon, assuming you like the stock. RON is close–but has not quite broken out of what I see as a big triangle–its worth watching as it does look encouraging.

      Reply
  • Hi Keith,

    If you are still taking suggestions on which sectors to cover, I would like to know your take on the healthcare sector. It seems like a hot sector by now, but as you mention in your first book “smartbounce”, it’s not a bad idea to apply contrarian filtering in some analysis.

    Thanks,
    Steven

    Reply

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