The first week of 2018 provided gains galore for stock bulls. One of the emerging themes worthy of your attention is the potential for a commodity comeback, particularly in energy stocks.
In contrast to virtually every other sector, oil stocks only just recently began trending higher. While the broader market has been flirting with record highs for years now, the energy complex has been wallowing in the mud plagued by a crash in crude oil and a lack of inflationary pressures.
But if the price is any indication (and it always is), a new bull market in crude oil has sprouted, and investors are beginning to show inflation-sensitive assets like energy stocks some love. This is a theme that could very well continue throughout all of 2018.
Today we look at three ways to capitalize on further strength from the oil patch.
3 Energy Stocks to Buy on a Dip: Exxon Mobil Corporation (XOM)
Since bottoming in late-August after a nasty breakdown, Exxon Mobil Corporation (NYSE:XOM) shares are up 15% which is significant for one of the largest, lowest beta names in the oil industry. Its latest development of note was last week monster breakout that finally felled a significant resistance level.
To say $84 was a critical level is an understatement. It kept a lid on the oil giant for the entirety of 2017, halting no less than eleven recovery attempts.
No wonder its failure was met with such rapid-fire follow through. With the ceiling so thoroughly smashed, it’s a good bet XOM stock’s new uptrend is here to stay.
The principal issue facing would-be buyers is Exxon’s now overbought status. Those unwilling to chase should consider placing buy orders near $84 to $85. Any weakness to that area demands to be bought.
3 Energy Stocks to Buy on a Dip: Schlumberger Limited. (SLB)
Traders looking for a higher octane path to energy sector exposure might consider Schlumberger Limited. (NYSE:SLB). The oil services kingpin just completed a long-term bottoming pattern and is now trending higher for the first time in over a year.
Last week’s breakout point occurred right at the falling 200-day moving average. Spectators waiting for SLB to reclaim the high ground above this oft-watched long-term moving average certainly struck with gusto.
The groundswell in volume and sheer magnitude of the followthrough suggests the breakout is here to stay. Similar to Exxon Mobil shares, SLB is flashing overbought signals. In the short run, we may be in for a few days of backing-and-filling or perhaps a pullback.
Either way, weakness in Schlumberger shares is a gift from the Gods and should be treated as such. Place your buy orders around $69 to $70.
3 Energy Stocks to Buy on a Dip: S&P Oil & Gas Explore & Prod (XOP)
Our final highlight allows you to sidestep the stock picking game altogether. Rather than attempting the often treacherous gambit of identifying winners and losers, why not simply buy the entire energy sector?
The SPDR S&P Oil & Gas Explore & Prod. (ETF) (NYSEARCA:XOP) should do the trick. Its burgeoning uptrend is moving into its fifth month of life and is firing on all cylinders.
One of the benefits of taking the ETF route is you won’t have to worry about any pesky earnings announcements upending your trade. Like its predecessors, XOP shares have risen a bit too far too fast. Watch for a dip toward $37, then pull the trigger.
As of this writing, Tyler Craig held bullish options positions in XOP. Want more education on how to trade? Check out his trading blog, Tales of a Technician.