ETF Watch: Buy OOO For Mean Reversion Trade In Crude Oil

Posted on | by Todd | Leave a Comment on ETF Watch: Buy OOO For Mean Reversion Trade In Crude Oil

Over the last 10 trading sessions, WTI Crude Oil has dropped over 13% from $52.00 to last nights low of $45.20.

Technically, we see good support near the $43.75 area, which was the reversal low posted on May 5th.

Fundamentally, increased political tensions between OPEC members Qatar, Saudi Arabia and Iran could escalate into military engagement with some associated levels of supply disruption in the near-term.

As such, we have been looking to buy the dip in some of the local energy names like Origin Energy and  Oil Search. (The ALGO engine gave a buy signal on OSH yesterday)

Further, we have also suggested that investors looking for a mean reversion higher in Crude oil prices can buy the BetaShare Oil ETF with the symbol OOO.

OOO traded as high as $8.10 just a week ago and has now in the low $7.00 area.

BetaShare Crude Oil ETF

 

Origin Energy

Oil Search

 

Buy The Pullback In Origin

Posted on | by Todd | Leave a Comment on Buy The Pullback In Origin

Origin Energy has been trading in a broad range between $6.70 and $8.10 over the last four months.

We recently took profits for client portfolios at $8.00 and are currently looking for a retracement into the $7.50 area to re-enter long positions.

The recent weakness in crude oil has had a dampening effect on various energy names. However, we feel Origin’s natural gas assets will keep the share price fairly well bid over the medium to longer-term.

Origin

 

ETF Watch – OOO (Betashares Oil)

Posted on | by Leon Hinde | Leave a Comment on ETF Watch – OOO (Betashares Oil)

We continue to track the Betashares oil ETF OOO.AXW

Oil prices have rallied from the recent low after this week’s largest inventory drop of 2017. EIA data has revealed U.S. crude stocks fell by 5.2M barrels. In addition, OPEC supply cuts have been agreed to by Iraq and Algeria joined Saudi Arabia.

Concerns regarding the abundant added supply of US shale oil will keep a lid on any meaningful rally, but we may see a bounce from the recent low. Investors should run stop losses under the trend low on both ETF and individual stock names.

Our best performing energy trade has been the long ORG position. However, due to the extended price rally since the Algo Engine buy signal, we’re now inclined to take profit in ORG and consider the OOO.AXW ETF as a replacement.

Chart – Betahsares Oil ETF

 

 

Origin Increases Beetaloo JV

Posted on | by Leon Hinde | Leave a Comment on Origin Increases Beetaloo JV

ORIGIN INCREASES INTEREST IN PROSPECTIVE BEETALOO JOINT VENTURE TO 70%

Origin Energy Limited (Origin) today announced it had increased to 70%  its share in the Beetaloo Joint Venture after acquiring Sasol Petroleum Australia Limited’s (Sasol)  35% share.

Origin CEO, Frank Calabria said, “Having recently announced the discovery of a material shale gas resource in the Beetaloo Basin, Origin has seized the opportunity to increase its interest in the Beetaloo Joint Venture by acquiring Sasol’s 35 per cent share.

Our Algo Engine triggered a buy signal in early March at or near $6.25. We remain long the stock and see upside potential to $8.00.

Chart – ORG

 

 

Origin Energy

Posted on | by Todd | Leave a Comment on Origin Energy

Shares of Origin Energy continue to slide after announcing yesterday that the company will take a $1.031 billion impairment charge on the APLNG gas export project in Queensland. This was the largest part of a broader $1.9 billion post-tax write-down.

Origin raised the bottom end of its forecast range for annual EBITDA by 3% to $2.45 billion, but kept the top end of the forecast at $2.62 billion.

Origin shares are down over 2% so far today at $7.10. We see initial support coming in at or near the $6.88 level.

Our Algo Engine created a buy signal in September 2016 at $5.00

Chart – ORG

OPEC Production Cut

Posted on | by Leon Hinde | Leave a Comment on OPEC Production Cut

We suggested going long oil names ahead of the OPEC meting, our preferred buy ideas were WPL, ORG, OSH and BHP. We see further upside ahead!

On November 30th, leaders of the Organization of Petroleum Exporting Nations (OPEC) agreed to their first production cut in eight years by collectively deciding to curtail crude oil production by 1.2 million barrels per day. Since then, West Texas Intermediate (WTI) Oil futures have gained over 6% from $45.20 to $51.50 at Friday’s NYMEX close.

The OPEC agreement got a shot in the arm on Saturday as 11 Non-OPEC oil producing countries agreed to cut their output by 558,000 barrels per day. This is the first time in over 15 years that a global agreement to cut production has been struck and adds fundamental support to the current rally in Crude Oil.

Technical indicators suggest the January WTI contract can move higher this week. The recent high in the $52.70 area is the next logical target, but there’s scope for a move back above $54.00 after this weekend’s Non-OPEC agreement. Near-term support is seen in the $49.60 area.

Although investors may be rightfully sceptical about the longevity of the OPEC and Non-OPEC productions cuts, our reading of the charts suggests being patient in trying to pick a near-term top in crude oil prices.

Chart - WPL
Chart – WPL
Chart - OSH
Chart – OSH
Chart - ORG
Chart – ORG