One of the few areas of the market that didn’t really participate in October’s rip-roaring rally — oil and gas stocks — have been perking over the last few days.
The sector is enjoying a rare bout of relative strength, on a scale not seen since April, in the context of a long downtrend started when crude oil began its long slide in the summer of 2014.
Crude oil doesn’t seem to be the catalyst: West Texas Intermediate remains near the $46-a-barrel-level, a threshold first tested back in January. Instead, better-than-expected earnings have showed that companies are managing the price deflation well.
Add to this ongoing concerns at the Federal Reserve about the negative impact lower energy prices is having on inflation — which is below their 2% target — and expectations are high that interest rates will remain near 0% until crude oil turns higher.
With all this in mind, here are five energy stocks to watch.
Oil Stocks: Chevron (CVX)
Chevron (CVX) reported better-than-expected earnings of $1.09 per share, 33 cents ahead of the consensus estimate. Revenues fell 37% over last year, to $34.3 billion vs the $27 billion expected. Capital expenditures for 2016 are expected to be between $25 and $28 billion — about 25% lower than this year’s budget.
As a result, shares have punched up and over their 200-day moving average for the first time since September 2014 — a 40% rebound from their August low.
Oil Stocks: ConocoPhillips (COP)
Shares of ConocoPhillips (COP) are making a run at their 200-day moving average, breaking up and out of a month-long consolidation near $55 per share. The company reported an adjusted loss of 38 cents per share last week on a 42% drop in revenue. The results were better than the Street’s whisper numbers, suggesting that maybe we’ve seen the worst of the two-year wipeout in energy.
Edge Pro subscribers are enjoying a 50% gain in the COP November $55 calls recommended on Monday.
Oil Stocks: Exxon Mobil (XOM)
Exxon Mobil (XOM) has broken through congestion near its 200-day moving average, pushing into free air as it returns to levels not seen since May. The company reported better-than-expected Q3 results of $1.01 per share on a 37% drop in revenues to $67 billion.
Analysts at Cowen wrote in a note to clients Monday morning that the earnings beat stemmed from a lower-than-expected tax rate and altered production mix. A focus on expense control has helped as well.
Oil Stocks: Halliburton (HAL)
Oil services major Halliburton (HAL) looks to be preparing for a breakout from a long seven-month downtrend pattern with a push above its 200-day moving average, something that hasn’t happened since early October 2014. The company reported better-than-expected results on Oct. 19, with earnings per share of 31 cents beating the consensus by four cents.
Edge Pro subscribers are ready with a position in the November $40 HAL calls as the company pushes ahead with its acquisition of competitor Baker Hughes (BHI).
Oil Stocks: Schlumberger (SLB)
Oil services provider Schlumberger (SLB) is also moving towards its 200-day moving average, a level last tested in June, as shares enjoy a 22% gain off of their early October low. The company reported better-than-expected earnings on Oct. 15 of 78 cents per share vs. the 77 cents analysts were expecting. Revenues dropped 6% sequentially on the decline in drilling rig activity.
Investors are now looking ahead to the completion of the acquisition of Cameron (CAM) announced back in August.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
