Energy stocks resumed their pandemic recovery rally Thursday after news surfaced that the Joint Ministerial Monitoring Committee – which oversees The Organization of the Petroleum Exporting Countries (OPEC) output quotas – has ordered overproducing countries to make up for their missed reduction targets last month.
As a result, Iraq and Kazakhstan have agreed to slash output that will see the two Middle Eastern oil producers over comply with OPEC's reduction cuts through the rest of June. "Now that Saudi Arabia and Russia have convinced Iraq and Kazakhstan to over comply, we should see overall compliance to the world's biggest production cut go to over 100% in the next few weeks," the Price Futures Group's Phil Flynn told MarketWatch.
Below, we take a closer look at two oil and gas production companies as well as a leading energy refinery firm. We'll then analyze the charts to identify important technical levels worth watching.
Occidental Petroleum Corporation (OXY)
Occidental Petroleum Corporation (OXY) produces and explores for oil and gas in the United States, the Middle East, and Latin America. Earlier this month, Bank of America Securities analyst Doug Leggate upgraded the $18 billion independent energy producer from "Neutral" to "Buy" based on its ability to meet debt obligations and prospects for increased cash flow. Leggate also thinks the company has an industry-leading asset base primed to benefit from rising oil prices. While Occidental Petroleum stock is still down 50% on the year, it has gained 86.89% over the past three months as of June 19, 2020.
Since mid-June, the share price has traded within a pennant pattern that finds support from the top trendline of a previous three-month trading range. Traders should consider buying a breakout above the pennant, targeting a move up to around $30.50 – an area the stock may encounter resistance from a late February countertrend bounce and the 200-day simple moving average (SMA). Protect downside by cutting losses if the price fails to hold above the June 15 low at $17.10.
Apache Corporation (APA)
Houston-based Apache Corporation (APA) engages in crude oil and natural gas exploration and production, with assets in the United States, Egypt, and the United Kingdom. Although the $5.37 billion energy giant reported a first quarter loss of 13 cents per share, the figure was narrower than the 30-cent decline analysts had expected thanks to a 10% rise in production at the firm's Permian Basin acreage. As of June 19, 2020, Apache stock has a market capitalization of $5.37 billion, offers a 0.72% dividend yield, and has soared 187% in the past three months.
The shares broke out from an area of four-week consolidation on above-average volume in early June but have struggled to gain momentum since. Active traders could consider using a recent retracement to the breakout point to position for further upside, setting a profit target near crucial overhead resistance at $29.50. Manage risk by placing a stop-loss order beneath the June 11 low at $12.31 and amending it to breakeven if price closes above the 200-day SMA.
HollyFrontier Corporation (HFC)
HollyFrontier Corporation (HFC) is an independent petroleum refiner in the United States, operating through three business segments: Refining, Lubricants and Specialty Products, and HEP. The Dallas-based firm diversifies industry-specific risk by marketing its products to other refiners, convenience store chains, independent marketers, railroads, governmental entities, and aviation customers. Analysts have a 12-month consensus price target on the stock at $37.64 – implying a 16% premium to Thursday's $32.56 close. In the past three months, the stock has added 47.84%, but it is still trading more than 30% lower year to date as of June 19, 2020. Investors receive a 4.5% dividend yield.
HollyFrontier shares have trended higher in an ascending channel since hitting their 52-week low in March. In recent price action, buyers have defended the $30 level, where the stock appears well supported by the channel's lower trendline and 50-day SMA. Those who enter here should anticipate a move to the opposite side of the pattern at around $40. Protect trading capital with a stop positioned underneath this month's low at $29.55.