(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
The energy sector has been showing signs of strength as the price of West Texas Intermediate Oil has soared by over 33 percent since July 3, to over $60 per barrel. With the rise in oil prices, stocks like Halliburton Co. (HAL), Anadarko Petroleum Corp. (APC), and Schlumberger NV (SLB) are breaking out based on a technical analysis of the trading charts. All three stocks could see their prices increase by about 15 percent or more in the coming months.
Anadarko shares recently broke out after crossing a technical resistance level at roughly $53.75. The rising stock price could climb by nearly 19 percent to almost $63.75, the next technical resistance level. Additionally, the stock has been able to clear two different downtrends over the past few weeks.
The relative strength index (RSI) is high at nearly 80, but with strong support in place at $53.75 and a new uptrend developing going back to late August, any pullback in the stock price will likely be short-term, in a longer-term uptrend.
Schlumberger also recently broke out, with the stock price rising through a nearly year-long downtrend. The stock has a reasonably clear path to increase by almost 21 percent from its current price around $72.60, to roughly $87.60, when hitting the next major technical resistance level.
Like Anadarko, Schlumberger's RSI is high at around 80 because the stock has risen so quickly. But again, any pullback is likely to be short-term because the stock has a substantial level of technical support at approximately $69.70.
Halliburton shares have broken above resistance at $50.25 after struggling on two prior attempts. The stock had been stuck in a nearly six-month downtrend, breaking out in mid-September.
With the stock rising above resistance at $50.25, there is a clear path now for it to climb another 18 percent to $59.25 – the previous high last seen in January 2017. Should the stock reach $59, it would still be trading more than 20 percent below its all-time high around $75.
All three stocks are showing signs of strong technical breakouts. Should oil prices continue to climb as they have recently, these breakouts could be the start of a longer-term bull run.
Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.