- Trade weaker demand in oil stocks tied to lockdowns smartly in a fluid market.
- Shell (SHEL) is getting past its fossil fuel heritage and key chart resistance.
- Chevron (CVX) extended and overbought CVX stock rally running on fumes.
- TotalEnergies (TTE) boasts recent earnings beat, attractive dividend and technicals.
At the onset of the pandemic, life as most Americans knew it, changed dramatically. It was the “new normal.” Amid stay-at-home orders, travel restrictions and forced business closures, energy prices and oil stocks were punished to decade and worse lows. And it made sense. The slack in demand was happening on a global scale.
Today, the “new normal” has long been in the rearview mirror in the U.S. But overseas in China, particularly in Shanghai, government enforced lockdown orders over the past couple of months amid rising Covid-19 cases have been headline news.
Life isn’t a vacuum though, and this isn’t 2020 with demand for oil stocks disappearing overnight. Not only are global markets much better prepared for the next outbreak, but some other boogeyman like the war in Ukraine and Russian embargo can (and have) come along to disrupt the supply and demand dynamics.
So given the reality that lockdowns will lower demand, but other factors and catalysts can arguably trigger even higher energy prices and a stronger operating environment for oil stocks or conversely help with a collapse, let’s smartly look at three oil stocks to trade using the price chart’s supply and demand factors to govern the decision.
|SHEL||Shell (formerly Royal Dutch Shell)||$56.88|
Shell (NYSE:SHEL), formerly known as Royal Dutch Shell, is the first of our oil stocks to trade. And this energy giant is a name to trade long with a purchase of SHEL stock.
Unlike many of its fossil fuel competition, this integrated oil stock is working a bit harder for long-term sustainability as energy trends shift towards renewables and while Shell is in an advantageous cash flow position due to today’s through-the-roof energy prices.
Shell insists it can transition to net zero by 2050. But pivot has come at the expense of income investors as the oil stock slashed its dividend in 2020 and played a sure role in SHEL stock’s weaker performance versus many of its peers over the past couple years.
Still, this oil stock’s growing solar and wind assets which tops the supermajors, should pay-off long-term for investors. And today, the monthly price chart in SHEL stock reveals a decent spot to buy in.
Technically, shares of Shell have been consolidating on either side of the stock’s mid-channel line, as well as Fibonacci and two-step pattern resistance. In front of earnings this oil stock looks ripe for a period of bullish momentum past resistance to new highs and channel resistance over the coming months.
Chevron (NYSE:CVX) is the next of our oil stocks to trade more wisely. And unlike SHEL, the observation is CVX stock is a sell or short.
If you’re of the mind today’s lockdowns will amount to something more in keeping with energy demand Covid-19 circa 2020, a short in CVX makes sense. Shares did trade as low as $46.46 amid warnings of the end of days for oil during the pandemic’s early going. And that’s a far cry from today’s market price of $165 in this oil stock.
Alternatively, if you believe that there’s more greenwashing than actual greening. Or a dragging of corporate feet related to renewables, which would ultimately bad for business longer-term, then consider that just another reason to sell this oil stock now or open a short position.
Lastly, and given that all high-octane stock performances run out of gas, today’s price chart in this oil stock is warning an extremely bullish run the past several months is at greater risk of a larger correction.
The observation is a bearish cycle could take shares as low as $110 – $125 and challenge CVX’s 38% – 50% Covid-19 retracement zone and trendline support. Today, put this oil stock on watch for selling or shorting if CVX shares confirm April’s bearish-looking inside doji candlestick, as to avoid or profit from anticipated weakness.
TotalEnergies SE (TTE)
TotalEnergies SE (NYSE:TTE) is the last of our oil stocks to trade. And following an earnings beat last week, a buy in TTE stock is a more timely-looking recommendation than raising worries of how lockdowns might weigh on oil stocks and energy demand.
Zacks Equity Research reports the French-based supermajor delivered first-quarter earnings of $3.40 per share which beat its consensus view by 21.9%. At the same time, revenues jumped by nearly 57% from the year-ago period.
Rising energy prices have obviously been good to this oil stock’s bottom-line and its overall fundamentals. But similar to Shell, TTE is providing more than just lip service as it looks to transition into cleaner renewables.
Notably, this year the outfit purchased select assets from SunPower (NASDAQ:SPWR) to expand its U.S. presence and develop more than 100 megawatts of additional renewables capacity.
Technically, TTE offers today’s investors a more rare and well-constructed opportunity to buy shares smartly with the added teaser of a 6% dividend. This oil stock has just confirmed the completion of a three-month pullback within a decade’s old, slighter uptrend channel.
With stochastics well-neutralized and flattening, the expectation is a breakout of the longer consolidation pattern and new highs, as well as a period of outperformance are likely to unfold in this year’s second half.
On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.