Where to Buy and Sell Top Energy Stocks

NEW YORK ( TheStreet) -- The weak employment data were a signal to energy traders that demand for gasoline on Main Street in the U.S. remains weak.

Thus, crude oil fell to less than $100 per barrel on Friday to a low of $95.34 Sunday evening. As recently as May 1, energy traders were yelling "breakout" as oil traded for more than $106 on the stronger-than-expected ISM data.

Another reason for recently lower oil prices was the decision by the CME to raise margin requirements.

I was skeptical about the upside for oil, as I saw gasoline prices begin a slide of 30 cents per gallon two weeks before the ISM report.

With a civilian labor force participation rate of only 63.6% in April, demand is even weaker than analysts' expectations

For the overall stock market, the fundamentals are favorable, as our Web site ValuEngine.com shows that 64.3% of all stocks are undervalued.

The Sector Valuations are mixed as 10 of 16 sectors are overvalued. The Oils-Energy sector is 8.2% undervalued. ValuEngine.com tracks 539 energy stocks, and 152 of them are rated Buy.

I will profile my "Buy and Trade" strategies for the stocks that have been in and out of my ValuTrader Model Portfolio so far in 2012, but first let's look at the weekly chart for crude oil to evaluate the weakening technical picture.

Chart courtesy of Thomson/Reuters

The weekly chart for crude oil is negative as oil closed on Friday below its five-week modified moving average at $102.88 with declining MOJO (12x3x3 weekly slow stochastic) readings.

The downside is toward the 200-week simple moving average at $81.97. My semiannual value level is $79.83 with my quarterly pivot at $101.55, and annual, semiannual and monthly risky levels at $103.58, $104.84 and $108.53.

Note that Friday was an outside day to the downside, defined by a high above the prior day's high with a close below the prior day's low.

The next major issue for the energy market is that hurricane season begins on June 1. The most current forecast I read calls for nine named storms, but only four are expected to become hurricanes. If there are newer forecasts showing potential increased storm activity, that could fuel a rebound in the Oils-Energy Sector.

Buy-Rated Energy Stocks That Are Traded in and out of the ValuTrader Model Portfolio

Baker Hughes ( BHI) - ($41.18) traded to a 52-week low at $39.40 on April 10. The oil & gas field services company has weekly and monthly value levels at $36.18 and $35.99, respectively, with a quarterly risky level at $56.72. BHI is a member of the ValuTrader Model Portfolio.

Chesapeake Energy ( CHK) - ($17.39) traded to a 52-week low at $16.70 on May 3. The company is primarily involved in finding natural gas and oil on shore. We know the company has issues in the management ranks, but a stock screening service such as ValuEngine cannot know this. My semiannual value level is $16.13 with a semiannual risky level at $24.48. CHK is currently not in the ValuTrader Model Portfolio. It was last removed from the portfolio at $24.45 on Feb. 17 for a gain of 9.6%.

Exxon Mobil ( XOM) - ($84.47) has made several attempts to breakout above $88.00 since Jan. 23 without success. The premier energy company on the planet is trading between quarterly pivots at $80.39 and $85.98, so a correction to its 200-day simple moving average at $80.16 is feasible. XOM is currently not in the ValuTrader Model Portfolio. It was last removed from the portfolio at the quarterly pivot at $85.98 on April 18 for a gain of 2.9%.

Schlumberger ( SLB) - ($69.96) could trade down to my weekly and monthly value levels at $66.88 and $65.84. My quarterly risky levels are $77.47 and $80.54. This global oil & gas field services company is currently in the ValuTrader Model Portfolio.

Suncor Energy ( SU) - ($30.35) traded to a year-to-date low at $29.29 on April 10. Suncor is the leader in mining and extracting crude oil from Canadian oil sands. My weekly value level is $28.62 with a monthly pivot at $31.53 and quarterly risky levels at $32.19 and $34.99. SU is currently not in the ValuTrader Model Portfolio exiting last at $31.91 on April 17 for a gain of 5.1%.

With my "buy and trade" strategy you are always adding to positions on weakness to a Value Level and reducing positions on strength to a Risky Level. This is not labor-intensive. You simply enter "Good 'Til Canceled" Limit Orders to buy at the value level and sell at the risky level. A "buy and trade" strategy allows you to capture the price volatility as stocks move up and down.

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