Jump to content

Crude weakness fails to dent oil & gas stocks, with bulls remaining unmoved


Recommended Posts

Crude declines make little difference for FTSE oil & gas producers, with the long-term view remaining bullish for energy

bg_oil_pump_366223737.jpgSource: Bloomberg
 

 Joshua Mahony | Senior Market Analyst, London | Publication date: Monday 30 January 2023 

Crude declines see Brent lose 34%

Crude oil has suffered substantial losses over the course of the past year, with brent currently trading 34% below the March 2022 peak of $131.51. This decline represents grounds for optimism on the inflation-front, with headline CPI sliding lower across Europe and the US. However, traders continue to wonder whether this move will represent the top for the market or simply a temporary pullback within a long-term uptrend. Key considerations for the bulls include the re-emergence of Chinese economic activity as Covid restrictions are withdrawn, set against the risk of declining demand as recessionary pressures take hold. Looking at the monthly Brent crude chart below, we can see that this current month looks to be closing out in a doji candle, marking a second consecutive month of indecision. Meanwhile, the stochastic oscillator appears to be tightening, signalling the potential for a bullish shift in momentum before too long. With price currently trading around the 76.4% Fibonacci support level, the bulls will hope that the long-term uptrend will soon kick back into play.

LCO-Monthly-2023_01_30-13h18.pngSource: ProRealTime

SPR back down to multi-decade lows

Another aspect to consider comes from the US, who have been drawing down their strategic petroleum reserve in a bid to support prices as OPEC restrict output. That decline in reserves can only last so long, with current levels back down to the lowest point since 1983. Recent comments have signalled that the US could move to instead seek to top-up their reserves around the $70 mark. Could a shift from supplier to consumer help tip sentiment back in favour of the bulls?

SPRLEVELS30123.png

FTSE oil & gas producers outperform

One interesting area of outperformance has been the relative strength of oil producing stocks despite this decline in crude prices. Thus far, we have largely seen producers continue their ascent, with the volatility in oil and gas prices doing little to stifle sentiment. However, the chart below highlights how the FTSE 350 oil & gas producers sector essentially provides a more stable play on energy prices, with the stocks largely reflecting the underlying trend without necessarily seeing the same major swings that can occur for crude. The pullback we have seen in Brent (blue line) thus brings the total gains over the past two-years down to the area seen for FTSE 350 producers. For now, the uptrend remains in play for the sector, thus highlighting the belief that this recent pullback in energy prices serves to reflect a reversion back into the mean uptrend. With that in mind, the weakness seen in energy prices, and consolidation in FTSE oil & gas stocks, is deemed a potential precursor to another move higher to continue the long-term uptrend.

OIL-Weekly-2023_01_30-13h05.pngSource: ProRealTime
Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      23,652
    • Total Posts
      97,114
    • Total Members
      44,205
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    Olivia
    Joined 07/12/23 15:51
  • Posts

    • NUMBER 3: FX Capital Flow Scanner [Download Link, Zip File] Perfect for all levels of trading experience, beginner or professional You will always know what to trade and in what direction You can add any currency related symbols such as Gold (XAU/USD), Silver (XAG/USD) and Bitcoin (BTC/USD) 28 major currency pairs as default settings   How does it work? The model have two important moving averages, one fast (5) and one slow (12), they are used to determine whether the direction of a currency pair is bullish, bearish or neutral. Example, when the model is measuring the strength of EUR, it will look at all EUR related pairs (EUR/USD, EUR/CAD, EUR/CHF, EUR/GBP, EUR/NZD, EUR/AUD, EUR/JPY) to see what pairs are trading with, against or neutral with EUR and score the order flow of EUR accordingly. EUR is measured against 7 other currencies, so the score range from -7 to +7.    +7 is the highest score possible and means that EUR is making gains against all other major currencies. Therefore the order flow is strong because EUR is being bought on a global scale. There is a genuine interest to buy EUR so to speak.   -7 is the lowest score possible and means that EUR is decreasing in value against all major currencies. Therefore the order flow is weak because EUR is being sold on a global scare. There is no interest in purchasing EUR, only selling.   When the scanner have performed the order flow analysis on all currencies it will combine the strongest against the weakest and display the results on the dashboard. These will be the pairs with least resistance moving forward and the best pairs to trade. You can double-click on the pairs listed on the dashboard to open a new chart. In parameters you can select what template the new chart will open with.
    • NUMBER 2: MIDAS Trading Tools [Download Link, Zip File] MIDAS which is an acronym for Market Interpretation/Data Analysis System is the innovative work of the late technical analyst Paul Levine. Levine strongly believed that the dynamic interplay of support and resistance and accumulation and distribution are the ultimate determinants of price behavior. After examining and rejecting all of the standard technical analysis techniques for determining support and resistance, he came up with a new approach - MIDAS! The introduction of the MIDAS Trading Tools indicator has been a culmination of my trading experience and creative application. New ideas have been implemented and collaboration with other traders such as Robert Young (US) have helped make this indicator enriched and dynamic. In the readings below, you will find the description of the variables that make up the indicator.   MIDAS Trading Tools consists of TWO stand alone indicators for each type of market environment: MIDAS Support/Resistance Curves - reveals powerful support & resistance levels as well as a method to gage the relative strength of a given trend   MIDAS Top-Bottom Finder Algorithm - monitors the available fuel in an accelerated trend to predict the top or bottom based on the cumulative volume   How To Use: Basic Strategy & Concept Identify the origin of a trend in any market. Attach MIDAS to your chart. Click and hold on the Red vertical line and drag it to a recommended anchor point. Wait for price to pull back to the MIDAS Support/Resistance curve and generate a buy or sell signal. Enter the market when a signal is formed with a minimum risk to reward ratio of 1:1+. If price accelerates away before pulling all the way back to the MIDAS Curve; fit the Top-Bottom Finder to the present pullback(s) (by adjusting the cumulative volume in the bottom right corner) to predict the top or bottom. When the Top-Bottom Finder burns out at 100%, a retracement to the MIDAS Support/Resistance curve becomes likely.   If you are brand new to the MIDAS Trading System and interested in discovering the powerful trading method developed by the late Paul Levine, I recommend reading: MIDAS Technical Analysis: A VWAP Approach to Trading and Investing in Todays Markets. The authors walk you through the wonderful MIDAS world and explain its variations with copious charts and examples. Start off by reading the introductory chapters, then jump to the very practical money-making Chapter 8 and apply the principles yourself.
×
×
  • Create New...
us