NOW, IS THE TIME TO SELL A BASKET OF O&G E&P STOCKS
As TPA explained in the 5/19 World Snapshot, both Crude (WTI) and XOP, the Oil & Gas Exploration & Production ETF have had huge rallies from the March lows, but are now at or near technical resistance from their early March break downs through important support levels. XOP was down almost 3% yesterday – after TPA’s research note, but there is most likely more downside for the ETF and the subsector. TPA recommends selling a basket of O&G E&P stocks with a target P&L of +20% and a stop of -6%.
The table of E&P stocks is below. The basket is comprised of 7 E&P stocks: CVX, HES, CXO, VLO, COP, EOG, and PSX. The table of all the XOP holdings can be found at the bottom of this report. The basket stocks are the larger stocks in the XOP, with market caps of $10 billion or greater.
The table below shows that in the time period since 3/18/20, the S&P500 and XOP were up 21.89% and 65.28%, respectively. The average price change for the 7 stocks in the S&P basket has been +70.09%.
The first 2 charts below examine Crude (WTI), which fell below important 2 ½ year support in early March and then plummeted to trade at a negative price during expiration. Crude has now rallied, but is facing stiff resistance from the early March break.
Charts 3 and 4 show the O&G E&P short basket. The basket broke 2 major support lines before plummeting to its low on 3/18/20. The basket rallied as much as 72% from the 3/18 low before pulling back slightly. The basket is still very vulnerable given its huge rally and proximity to technical resistance.
Charts 5 through 11 show the individual stock charts for CVX, HES, CXO, VLO, COP, EOG, and PSX. Each stock has rallied between 52% and 88% and is not facing technical resistance. These stocks are very vulnerable to a pullback at these levels.
(Prices in this report are as of the close on 5/19/20)
O&G E&P SELL BASKET
XOP (ETF) HOLDINGS