In addition to the interest rate decision, the oil market is jumping due to the agreement struck with the non-OPEC countries over the weekend. This has us looking at several energy companies and exchange-traded funds that otherwise looked like they may have overextended themselves.
Shares of Exxon Mobil Corporation (NYSE:XOM) and Chesapeake Energy Corporation (NYSE:CHK) are moving up in early morning activity based on the higher oil price, providing trading opportunities in the Energy sector. In addition, the trade is ready to keep rolling on the United States Oil Fund LP (ETF) (NYSEARCA:USO) in response to the weekend’s news.
Exxon Mobil Corporation (XOM)
News on Exxon Mobil has been heavy over the last week as oil prices move higher and the company’s current CEO was named as a candidate for the position of Secretary of State in the new Trump Administration.
The former of these news items has XOM shares trading above their key-trendline support levels, which have drawn a seriously strong line in the sand just below current prices. As it stands this morning, the $86.40-$87.40 zone holds the 20-, 50- 100- and 200-day moving averages for Exxon Mobile stock.
The confluence of trendlines at this level indicates that XOM shares aren’t likely to take too hard of a dip in the near-term and that those dips would be heavily bought into by the technical community.
Shares of Exxon Mobil are creeping into overbought territory, but the news of the agreement between non-OPEC countries is likely to support XOM stock trading in a short-term overbought condition as the crowd continues to migrate cash into this trade.
For now, the overhead target for Exxon Mobil is $92 with support lying at the $87-mark.
Chesapeake Energy Corporation (CHK)
Another energy company that is making a technical move on the strength in oil is Chesapeake Energy. CHK shares have been one of the more technically sensitive stocks over the last year, making moves from technical trendlines and indicators as if they were drawn-out plays from a coach. This is one of the reasons we like covering Chesapeake stock here.
CHK shares are currently trading just below resistance at the $8-level. But they are making their way higher and this move could not only breach the resistance that has stopped the shares twice since April, but it will also break through the stock’s top Bollinger Band, which will accelerate the move in CHK to the upside.
With the 50- and 200-day moving averages on Chesapeake Energy trending higher, the stock rates well from our technical models with a price target of $9 before the conclusion of the first quarter.
One warning is that CHK stock’s upcoming move will push it deep into an overbought situation that will warrant either a consolidation or a short-term pullback in prices. Either should be seen as a potential opportunity to add positions to Chesapeake Energy before the next bull run.
United States Oil Fund (USO)
United States Oil Fund shares are getting a boost today on the weekend agreement. The agreement has USO shares trading near the $12 mark for the first time since June as speculators are seeing higher oil prices in the future.
The break above the $12-mark will be significant for a few reasons. First, this has been steadfast resistance from the chart and round-numbered perspective for the stock. Second, we’ve noticed a lot of put option activity at the $12 strikes, which suggests that the market was set for a selloff.
Momentum for USO shares has been building according to its MACD. The move in positive territory last month set the tone for a continuation in the rally and higher prices. The fundamental news of crude oil production has now acted as the catalyst to push United States Oil Fund shares into an intermediate-term trend after months of range-bound trading.
Traders should watch for some profit taking at the $12.50-price, but otherwise we are expecting the momentum to drive United States Oil Fund prices towards $13.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
