Oil service sector looking attractive

While the oil charts, and corresponding energy sector charts are stuck in a rangebound sideways pattern – There’s an argument to be made for looking at the Oil Services Sector. Today we’ll look at that sector to see why it may be intriguing.

To start off, lets take a look at the WTIC oil chart.

This is a long termed chart (2009) that I’ve posted many times before. My lines were drawn about 5 years ago, and they hold true today. Note that old resistance became new support around $65, as predicted. We’re just entering that zone now. Its quite likely that oil will maintain above $65, and eventually move up. But for now, its looking relatively flat.

Now lets look at the energy sector – aka the producers.

Here’s a long termed chart of the Canadian producers (XEG.TO). The producers look a bit more constructive than the WTIC chart. They are consolidating within a triangle, which can break out in either direction. If it breaks down, that’s bad news. If it breaks out to the upside, its very exciting. Given support on the WTIC chart, I’d give it the positive benefit of the doubt for now. But, keep an eye.

Now, lets look at the Oil services sector ETF (US).

This is a 5-year weekly chart to gain closer perspective than the longer termed charts presented above. Note the uptrend.  Note the trendline test which seems to be holding. Its meandering around its 40 week SMA, so the trend isn’t a strong one. Still, lots of momentum studies, circled below the chart, suggest good things to come. You can see that this chart looks much more attractive than the two above it.

Fundamentals

In a recent blog, I noted: “Recent reports have noted the growth and usage of carbon fuels is only going to be HIGHER going forward (eg- new AEI report shows energy supply will be 77% sourced from carbon fuels in 2040 – see my video here). Even with progressions of so-called clean energy technology, the reality of energy consumption in most applications will not be possible without proportionally higher usage of carbon fuels.”

I continue to emphasize that oil is not going away. I’ve noted the growing populations in emerging nations like China and India are playing catch-up with the developed world. They are not going to turn to solar, or wind, or electric vehicles. They want cheap power, a better lifestyle, and modern transportation. And they don’t care about political virtue signaling. So, oil is here to stay for a long while.

Besides, if fossil fuels disappear  – what will Justin Trudeau use to replace the tar he puts on his face? Heard a comedian say that the other day. Had to repeat it.

Bottom line

The charts and fundamentals tell the story for continued fossil fuel demand. Technically, energy is likely at support, but needs a trigger to assist in a bullish breakout. Meanwhile, the Oil Services sector is looking fairly attractive.

New videos

I just published two new videos. One covers the dangers of the SPX index for a potential slowdown in performance at this point in time, especially given the parabolic rise during the first half of the year. The other video looks at the major sectors of the S&P 500 – analyzing the technical profile of each sector one at a time. Here’s the link:

SmartBounce Technical Analysis Blog | ValueTrend

 

 

3 Comments

  • Interesting that the year over year growth is only international. USA down and Canada flat. If and/or when USA production falls should be good for WTI.

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  • Value stocks, such as the above and others, are on the staying put, marking time until the Chat GPT bubble bursts. This process may take a relatively long time. However. if the yield is decent. the dividends make waiting not too shabby.

    Meanwhile, for those eager to ride the tidal wave of this so-called tulip-mania, and think they can time the market and get out before the chat GPT stocks collapse, good luck. They pay no dividends..the Netflix, Amazon’s. Tesla, Alphabet Google). That speaks volumes of the lack of solid footing.

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