Option Investor
Market Updates

Oil Service stocks at resistance.

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The Oil Service Index (OSX.X) is trading right at our short-term downward trend and traders should keep an eye on things here. If I'm long some stocks in this group I'm using this index to help guide me in my trading. A move above downward resistance could get a rally in the group going further to the upside. I've overlaid a retracement bracket on the 60-minute chart from the September 12th high of 143.98 to the December 1st low of 94.94.

Oil Service Index (OSX.X) Chart - 60-minute interval.

I still think it would take a move above 130 to really get a raging bull in the oil service sector. Over the past month I've given traders a couple of stocks to watch and trade bullishly in. Shares of Seitel (NYSE:SEI) and Input/Output (NYSE:IO) are more involved with the "exploration phase", but I liked the stocks based on their technicals and the latter part of the oil/gas "cycle." I also like bullish plays in these stocks with the spring/summer exploration season just around the corner.

Seitel Inc. (SEI) Chart - 60-minute interval.

On Friday, shares of SEI pulled right in to its 50-period MA and we saw some volume come into the stock, probably a sign of some institutional "crossing." One institution perhaps crossing a small position 50,000 shares, to another institution perhaps starting to build a position. Time will tell but the stock is looking strong. This has been a nice stock to trade on MACD crossover. Swing-traders and investors that bought the stock back near $16.50 when we first profiled should be moving their stops up to a minimum of $17, if not $17.50.

Input Output (IO) Chart - 60-minute interval.

Things got "exciting" in shares of IO after our most recent bullish profile near $11.75 in late January, but the stock has been drifting lower lately. I'm looking for the stock to begin drifting higher from current levels. Bullish traders can give the stock another try here with a stop just under $12. I've adjusted upward trend to help you monitor any bullish trades from here. You can also use trading in SEI and the OSX.X to help you manage a trade in this stock. A break above the 52-week high of $13.10 could get the stock moving. More patient traders looking for some type of momentum might want to wait for a break above $12.50.

Gold/Silver Index Chart - 60-minute interval.

The bulk of my e-mail this weekend was on the above sectors/ stocks so I'm trying to cover them here. While I was either taking profits in the XAU.X on Friday or having traders raise their stops, the XAU.X continues to build gains. Traders that are still long from our bullish profile at $46.50 would now be targeting the highs found on 12/21/00 near $53.23. If you played this index bullish, just understand current risk/reward for the trade. You're up 5.5% in the index (the option itself is much more) and looking for a 2% additional gain. I'd be raising my stop so that I'm only risking 2% downside from here. I'd do the same for stocks that I'm long in this group.

Jeff Bailey
Staff Analyst

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