A view on the energy sector

A look at the energy sector. Oil prices are rising, on tension on Iran, and on the economic recovery. What do have to play with ?

XLE (daily view)
– The ascending triangle is broken, retested and up again. Strong pattern –

CVX (Weekly view)
– Ascending triangle, a few fake moves in the past. This one is for real ?

HAL (weekly view):
– Has still a lot of room to the upside, before breaking previous highs. A breakout of the triangle to the upside is to be watched.

USO (weekly view)
– An inverse head and shoulders pattern is being played out. If it persists, the measured move upwards would be 10 (neckline 40 minus low of head 30) and the target price is 50

XOM (weekly view)
– An inverse head and shoulders setup
– At all time highs. See the second chart, from 1996-2012.
– Is XOM regaining from Apple the status of largest company in the world again ?


Oil shortage or not ?

An interesting article with a Long Term view on oil demand :

The highlights :

  • Increased Demand, but no increase in supply : The International Energy Agency (IEA) is expecting oil demand this year to rise to 89.1 million barrels a day. That new estimate is 400,000 barrels a day more than it expected last month.
  • China Expected to Be Biggest Oil Consumer by 2030 : China’s thirst for oil is expected to rise to 17.5 million bpd. This means China would overtake the U.S. as the world’s biggest oil consumer.
  • India Shifts into Higher Gear : Heck, India’s Prime Minister Manmohan Singh, recently admitted that his country’s oil demand should jump 40% in the next decade!
  • There ARE New Oil Discoveries, But it takes a LONG time to bring those new oil finds to market. Tapping some of those deepwater fields requires technology that hasn’t even been perfected yet. And the sad fact is that the Brazilian finds, as well as new discoveries in China and Angola, and the potential for increased production in Iraq, just aren’t enough to make up for the rapid depletion of existing oil fields.

A look at the daily chart :

  • current support level at 37.5, also the 50dMA
  • this could be a buy on the dip opportunity. Wait for 2 to 3 days

A look at the weekly chart :

  • a 10 dollar range channel for the last 1.5 years.
  • Trend of latest 6 months is upward
  • a break of the 42 level is a realistic entry point to go further up to 52, the 200 d MA

Pieces of the market puzzle

OK. Let’s put some things together :

S&P 500 is in a channel, close to it’s 50d MA. No direction yet, but if there is one, it can be quite strong. What to look at ?

  • Oil (USO) had a strong pullback and will test it’s 50MA. Drop because of the stronger dollar. Would Kopenhagen have something to with it? Maybe, but then it’s only temporary, because of the momentum. Effect on oil consumption because of a more green world is not on short term.
  • Dollar (UUP) : The $ rises for several reasons (better data, euro weakness, raise of interest rates because economy improves)
  • Gold (GLD) : on it’s way back, also because of the dollar. But will it continue ? It is still a safe haven for central banks
  • Volatility (VIX) : high swings, a high swing up can be expected in the coming months. But with what effect on the stocks ?

So, currently it is a mixed view, that’s why the S&P is in a channel. We see good signs, bad signs. Is the US improving, but not ‘yet’ the rest of the world ? What about China (+), Dubai (-), Greece(-) ?

The clear direction of the last 6 months is gone, the Christmas Turkey is in the oven, check on it from time to time. I currently own UUP and DZZ, with tight stops.