Energy Stocks Outperforming Crude Oil

NEW YORK ( TheStreet) -- The dynamics for energy stocks vs. Nymex crude oil are different than those for gold stocks vs. Comex gold. On Monday, I discussed how Gold Stocks Continue to Lag Gold vs. their 200-day simple moving averages, as gold stocks were below their 200-day SMAs despite the breakout for gold above its 200-day SMA.

Here, I discuss how energy stocks have been leading Nymex crude oil by trading above their 200-day simple moving averages, while crude oil has not yet made that solid breakout.

In the first half of 2012, my forecast for Nymex crude oil called for a test of my first-half semiannual value level at $79.83 per barrel. Even with crude oil as high as $110.55 on March 1, I predicted that oil would not be able to sustain gains above my annual pivot at $103.58. Crude oil first tested $79.83 on June 21st. By June 29, the first half ended and $79.83 became a memory.

On June 27, I wrote Oil-Service Stocks Now Look Cheap and showed that the Oils-Energy sector was 19.0% undervalued according to www.ValuEngine.com with the oil and gas field services industry 32.0% undervalued. In this post, I profiled five oil services stocks that were Buy-rated, according to ValuEngine.

On August 1, I wrote Trading the Undervalued Energy Sector I profiled the 45 stocks in the Energy Select Sector SPDR Fund ( XLE) which includes the five oil services stocks recommended on June 27. Each of these stocks remained Buy-rated.

Since August 1, Nymex crude oil rallied from $88.91 to a high of $98.29 on August 23. The daily chart below shows that crude oil has been trading back and forth around its 200-day simple moving average at $96.61, and is on the cusp of that level again this morning.

Given the tug-of-war between the anticipation of a third round of Quantitative Easing and the slowing global economy, weakness in crude oil needs to hold my monthly value level at $93.30. If the FOMC announces QE3 on Thursday afternoon and oil clears its 200-day simple moving average, the upside is a potential return to my annual pivot at $103.58.

Tuesday, ValuEngine shows the oils-energy trading right around fair value at 0.5% overvalued with the oil and gas field services industry undervalued by 8.2%.

Here is today's profile of the five energy stocks that I originally profiled on June 27.


Chart Courtesy of Thomson/Reuters

Reading the Table

OV/UN Valued: The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating: A "1-Engine" rating is a Strong Sell, a "2-Engine" rating is a Sell, a "3-Engine" rating is a Hold, a "4-Engine" rating is a Buy and a "5-Engine" rating is a Strong Buy.

Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.

Forecast 1-Year Return: All stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.

Value Level: The price at which to enter a GTC Limit Order to buy on weakness. The letters mean; W-Weekly, M-Monthly, Q-Quarterly, S-Semiannual and A- Annual.

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.

Risky Level: is the price at which to enter a GTC Limit Order to sell on strength.

Baker Hughes ( BHI) ($46.65 vs $38.26 on 06/27) continues to have a Buy rating, a reasonable P/E ratio, and is above its 200-day SMA at $45.49.

Diamond Offshore ( DO) ($67.41 vs $56.61 on 06/27) still has a Buy rating, a reasonable P/E ratio and has been above its 200-day SMA at $63.23 since July 13th.

Nabors Industries ( NBR) ($15.35 vs $12.79 on 06/27) still has a Buy rating, a low P/E ratio and is below its 200-day SMA at $16.49.

National Oilwell ( NOV) ($81.02 vs $60.90 on 06/27) still has a Buy rating, a reasonable P/E ratio and has been above its 200-day SMA at $73.68 since July 26th.

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