This column was originally published on RealMoney on April 26 at 1:38 p.m. EDT. It's being republished as a bonus for TheStreet.com readers.
Four of the seven oil drillers bottomed on Feb. 15, with the other three going deeper into the ocean floor into March. Now, six of the seven -- Baker Hughes (BHI - Get Report), Diamond Offshore (DO - Get Report), GlobalSantaFe (GSF), Halliburton (HAL - Get Report), Noble (NE - Get Report) and Transocean (RIG - Get Report) -- have reached 52-week highs over the past five trading sessions.
In February, I encouraged investors to add to positions on weakness to value levels. (A value level is a price at which my models project that buyers will emerge.) Now, with the energy sector 25.6% overvalued, the oil drillers have become overvalued and are becoming overbought. The only member of the Ocean's Seven that is trading around its fair value is Nabors (NBR - Get Report).Nymex crude oil penetrated and held my monthly pivot at $67.40 on April 5 (a pivot is a value or risky level that has been breached in its particular time horizon; the stock will likely trade around this pivot), energizing another momentum run, which reached an all-time high at $75.35 last Friday vs. my quarterly resistance at $75.94. The weekly chart profile shows rising momentum and a level that is just below becoming overbought. My model projects that crude oil prices have set a ceiling for the second quarter, and this justifies profit-taking in the Ocean's Seven.
|Drilling Down on the Oil Drillers|
|Company Name (Symbol)||April 25
|Baker Hughes (BHI)||$75.93||HOLD||18.80%||$63.92||RM||$70.69||66.74 Q||73.70 M||none|
|Diamond Offshore (DO)||$93.81||HOLD||12.10%||$83.71||OB||$87.26||78.30 Q||89.15 Q||none|
|GlobalSantaFe (GSF)||$63.00||HOLD||17.50%||$53.63||OB||$60.62||53.04 Q||60.73 M||none|
|Halliburton (HAL)||$78.82||BUY||15.50%||$68.24||RM||$75.26||69.15 Q||84.31 M|
|Nabors (NBR)||$37.47||BUY||-3.10%||$38.69||RM||$35.95||31.86 A||37.98 Q||40.52 M|
|Noble (NE)||$82.40||HOLD||13.50%||$72.59||RM||$80.21||77.29 Q||84.93 M||none|
|Transocean (RIG)||$84.00||HOLD||15.50%||$72.76||RM||$81.00||79.79 M||84.14 Q||none|
|Key: OB, overbought; DM, declining momentum; RM, rising momentum; OS, oversold; M, monthly; Q, quarterly; S, semiannual; A, annual. A value level is a price at which my models project that buyers will emerge; a risky level is a price at which investors are likely to reduce holdings, according to my models. A pivot is a value or risky level that has been breached in its particular time horizon; the stock will likely trade around this pivot.
Source: Global Market Consultants