Back on Nov. 30 the energy sector received a powerful boost following news of OPEC's production cuts. For its part, Marathon Oil surged over 20%, by far its best gain in years. This powerful move drove the stock to new 52-week highs before running out of steam just below $20.00. The very orderly pullback that followed is beginning to look complete. Patient MRO investors should keep a close eye on the action through the end of the week.
As December began, it was becoming clear MRO's post-OPEC breakout had become exhausted. After stretching its gain off the November low to just over 50%, the stock was in need of a consolidation. MRO moved sideways in a tight range just below the highs for the remainder of December, but, by the start of this year, a deep pullback had begun. The stock traced out an orderly bear channel for the next 12 weeks that retraced 75% of the post-election rally. This week, after reaching a new low early Monday, MRO looks poised for a clear break of this trend.
In the near term, MRO investors should consider the stock a low risk buy near current levels. There is now a very solid support zone in place near last week's high ($15.60). A key hurdle remains the multiweek March highs near $16.65. A convincing take out of this level would be very encouraging. On the downside, a close back below $14.30 would violate this week's low indicating a deeper pullback is ahead.