RRG shows us the rotation in XLE sector fund outperforming the benchmark S&P500, which opens up the idea of energy stocks outperforming in Q4. If we look deeper into the rotations within the sector, we can filter down stocks that are more likely to continue their upside momentum in the following cycle.
The RRG below shows us which stocks are gaining momentum in relative terms with the focus into the improving quadrant.
BAKER HUGHES (BKR, $26.60)
The weekly chart below Baker Hughes shows how the stock has respected its 200MA drawing a phycological line in the sand and has followed on to give us weekly upturns in stochastics and MACD indicators. The daily MACD also continues its bullish momentum with price clearing above its 50MA once again.
Hurdle points ahead will consist of the weekly VWAP aligned with the neckline of the double top pattern around $29, however given the momentum and sector strength, we will hold core longs unless signalled otherwise.
Initial targets of $40 assuming we have found a base here at the 200MA therefore we recommend stop positions at $21 giving the market a little breathing room.
HALLIBURTON (HAL, $33)
Similarly, HAL has cleared its daily VWAP after rejecting the weekly 200MA. Continued momentum in daily MACD's and a recent upturn in weekly MACD's, we have confidence of a similar push higher to retest recent highs around $43.50. A sustained break back below $28 support level and the 50MA dynamic support would be needed to bring this rebound into question, otherwise we expect higher prices in Q4.
Targets $$43.50
Stop loss $26
COTERRA ENERGY INC, (CTRA, $29.67)
Another leading stock within the sector moving its way into the improving quadrant of the RRG. CTRA has similarly appeared to have found a base and rebounding off its Daily 200MA/ VWAP putting it a new higher low. MACD momentum remains positive and is showing increased strength against the benchmark.
We would expect the trend to continue until signalled otherwise with targets at previous highs. A confirmed break below the dynamic support levels taking out the minor swing high around $25 would be needed to negate this view.
Target $35
Stop Loss $25
Please always remember this is not personal financial advice but rather our take on what the market data is telling us. Always reach out to qualified advisors for tailored advise.
Let us know your thoughts regarding these ideas and get in touch for any queries.
A Sweeney
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