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14 Energy Stocks Illustrate Difficult Stock Picking

Stocks in this article: APA BTU CHK CVX DO HAL HES KMP NBR OXY RIG SLB VLO XOM XLE

NEW YORK (TheStreet) -- In my first post this morning I showed how tough it is to pick stocks in the basic materials sector. In this article I expand by screening through the oils-energy sector to identify stocks that are suitable investments in 2014. I narrowed my 'buy and trade' choices down to 14 stocks that are tradable, but should be underweighted in any longer-term investment allocation given the overvalued and overbought stock market. Included in my analysis are Dow components Chevron (CVX - Get Report) and Exxon Mobil (XOM - Get Report) which have hold ratings according to www.ValuEngine.com, are overvalued by 24.1% and 29.2% respectively and have lagged the market with gains of 12.6% and 13.9% over the last 12 months respectively.

These 14 stocks are in a sector that's 15.5% overvalued. I give the oils-energy sector an underweight rating as 29.8% of the 540 stocks in this sector have sell or strong sell ratings and only 1.5% have buy ratings.

Among the 14 stocks in today's table 13 have hold ratings with Peabody Energy (BTU)rated sell. Since the oils-energy sector has a difficult stock picking profile investors should consider using the electronically-traded fund for an underweight allocation to this sector.

SPDR Oils-Energy (XLE) ($87.10) set a new multi-year intra-day high at $88.50 on Dec. 31 vs. the all-time intra-day high at $91.37 set in May 2008. This ETF includes Dow components Chevron and Exxon Mobil. The ETF is up 19.4% over the last 12 months and is above its 200-day simple moving averages at $82.66 vs. the oils-energy sector which is up 13.3%. The daily chart below shows downside risk to the 200-day SMA given daily closes below the 21-day and 50-day SMAs converged at $86.77. The weekly chart shifts to negative on a close this week below with its five-week modified moving average at $86.75. I show a quarterly pivot at $86.54 and quarterly and annual risky levels at $88.66 and $89.37.

Courtesy of MetaStock Xenith

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