FYI: Below is an updated look at our trading range screen for the 30 largest Energy sector stocks in the S&P 500. There’s a detailed description of how to read the screen at the bottom of the image, but basically, the dots represent where each stock is currently trading, while the tail end represents where it was trading one week ago. The black vertical “N” line represents each stock’s 50-day moving average, and moves into the red or green zones are considered overbought or oversold.
Regards,
Ted
https://www.bespokepremium.com/think-big-blog/energy-stocks-explode-higher/
Comments
That suggests to me: a) heavy window-dress selling & short-selling accelerated the negative price action in energy stocks (and energy futures) through qtr-end; and then, in early October, b) unwinding of some of those short-positions, and short-term selling "exhaustion".
I suspect those latter technical factors are mostly spent, with the lion's share of quick gains mostly in (short-term). Of course precise timing is difficult, and pricing strength may persist a bit longer. BUT --- keep an eye on the calendar:
a) Q3 results are coming very, very soon -- energy firms mostly report between now through the 1st week of Nov. For many, they will not be accurately called "earnings reports" -- because the "earnings" won't be there in any kind of impressive fashion. Based on WTI during Q3, I would expect some lousy results from operations, PLUS impairment charges for unprofitable assets. Have all the Q3 results already been anticipated and discounted in share prices? I've no idea, but its unlikely Q3 results will be helpful for energy share bids.
b) 10/31 is the tax year-end for many institutions. Anybody sitting underwater in the energy names would be remiss to not rack up as many tax-losses as they can (i.e. sell the losers). --- If they are also holding stocks (outside of the energy space) which are near all-time highs, they may figure "hey, I am booking substantial tax-losses, so from a tax perspective, I've got no reason not to de-risk my holdings by reducing exposure to expensive stocks". I would think names like GOOGL, AMZN, FB (all good stories, fundamentally, but their stock prices having discounted a lot of that good news) might be "sources of funds" for institutions, just as the down-n-out energy sector may be.
Its apropos that our "scary holiday" (Halloween) is 10/31....
Of course, Nov 1, is a "new year" for those same institutions -- so institutional bids/buying possibly may then resume in earnest.
JMO