Is the run in oil over, or still bubbling? In my opinion, which is dangerously close to a fact, no one knows. My preference would be to select a few stocks within the oil patch, identify important breakout points, and then make the appropriate trade. So, that is what I decided to do. Two stocks in particular that peaked my interest:
First, take a look at the 1-year chart of CXO (Concho Resources) below with my added notations:
CXO has created a clearly defined breakout point, which would be through $110. A break above this level would be a signal that CXO should be moving higher. However, there is also a clear breakdown level at $98. If CXO were to turn down and break below $98, one would expect lower prices ahead.
Next, you will see similar levels with SLB (Schlumberger) on the chart below:
As with CXO, SLB has created a clearly defined breakout point through the $95 level. A break above this level should signal that SLB is moving higher. Once again, there is also a clear breakdown level in the $80-82.50 “zone”. If SLB were to instead break below $82.50 and/or $80, it would be reasonable to expect lower prices for SLB.
The Tale of the Tape: CXO and SLB are stocks in the oil services industries that are worth watching. They both show clear entry points for long positions on breakouts, while also giving clear entries for short positions on breakdowns. Having stocks in your portfolio such as CXO and SLB with these clear “signals” can set you up for more successful trading, rather than guessing based on opinions.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT