During Jim Cramer's Mad Money program Tuesday he took a technical look at the oil complex, from big-cap names to exploration to the services exchange-traded fund.
During the "Off the Charts" segment, Cramer teamed up with Real Money Pro's Robert Moreno to examine energy.
"These pictures tell you more than a million words ever could," Cramer said. "But you need to remember that this can all change in the blink of eye if the price of oil keeps going down, which could ruin everything here."
Moreno's charts paint a bullish picture overall, but Cramer said he remains a skeptic given the propensity of oil to fool the maximum number of people at every single turn.
Below are Moreno's charts and his analysis of patterns of the stock movement:
The counter-trend breakout call in Exxon Mobil (XOM) - Get Report on Aug. 30 was correct, but when the stock touched its 200-day moving average I expected a period of consolidation. It broke above that channel top on fundamental news and then moderated back into the channel.
The Market Vectors Oil Services ETF (OIH) - Get Report broke out of its flag pattern as expected, but quickly lost momentum and it began to move sideways. Schlumberger (SLB) - Get Report met resistance as predicted at its 200-day average.
My thinking was that the flag patterns on the service sector charts would power eventual breaks above their 200-day moving averages and lead the broader energy space higher. The calls were correct in the short term, but the macro call was wrong. The 50-day moving averages failed and the entire complex continued its decline.
Exxon Mobil eventually did consolidate as expected, but instead of following that with a breakout, it broke down through the 50-day moving average. It then went through an unstructured or erratic period of price activity before rallying of its low this month, retaking the 50- and 200-day averages. Moving average convergence/divergence (MACD) is tracking higher, reflecting the recent positive price momentum and the accumulation/distribution line a measure of money flow is well above its 21-day signal average.
Overall volume is declining, and that will have to improve to sustain a rally. While the technicals look good, I'm skeptical that the stock price can keep up its rate of upward acceleration.
The CVX chart, to my eye, looks like it is structured better to sustain a move higher. This year, the stock had been trading under a resistance level that was former support and is also the 50% Fibonacci retracement level of its 2009 low and 2014 high and above an uptrend line of the August and January lows. It is currently trading above the Fibonacci resistance level and its 200-day moving average and is testing a long-term downtrend line drawn off the 2014 and 2015 highs.
Price momentum and money flow indicators are positive on this chart, too, but CVX has not made its big move yet. The price performance graph at the bottom of the chart shows the performance of CVX relative to XOM over the last six months and it is basically the same. But year to date, XOM has outperformed CVX by 9.5% and CVX looks like it is poised to narrow the gap. A break above the downtrend line from this well-structured consolidation phase should power CVX much higher.
Pioneer Natural Resources (PXD) - Get Report may have formed what could be a long-term triple bottom on its daily chart. The stock is currently back above its 50-day moving average and testing the resistance line it broke above to start the October 2015 rally.
The relative strength index is above its centerline and the A/D line is on an upward path. PXD has outperformed the Energy Select Sector SPDR ETF (XLE) - Get Report by 13% over the last six months and if it confirms the triple bottom by getting above and building on the $126 level it could continue it pace of outperformance.
The OIH has been doing some interesting consolidation of its own this year and has formed a cup-and-handle pattern on its daily chart. The Aroon indicator at the top of the chart is designed to identify early trend changes by green and red line crossovers. It has made a bullish crossover, suggesting a new uptrend is underway. Volume is light, but should improve after a break above the rim line of the pattern and Chaikin money flow is well into positive territory. Currently, the intersection of the 50-day moving average and rim line of the pattern is being tested. A successful breakout projects a target price measured by adding the height of the cup to the rim line and that takes the OIH to the $27.50 area.
An inverse head-and-shoulders pattern, one of the most reliable bottoming patterns, has formed on the SLB chart. The neckline in the $72 level coincides with a long-term downtrend line drawn off the 2014 and 2015 highs and it was broken last week. The relative strength index and Chaikin money flow signaled a change in price and money flow momentum as the head of the pattern was being formed in January and the Aroon indicator is identifying the possible start of a new uptrend. The formation projects a target price measured from the head to the neckline and it would take the stock back up above its October highs. SLB is best in sector and has outperformed the OIH by 26% over the last nine months. A pattern breakout will help it continue on that path.
The different sectors in the oil complex are making coordinated attempts at basing and the technical bias is to the upside. It would be foolish to call an absolute bottom, but whatever the future intermediate-term move in space, the integrity of the clearly defined lines of support and resistance on the charts will be a guideline.
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