Just as I think networking stocks fortunes will partially depend on telecom strength, it is only fair to think that oil service stocks will benefit from an oil/gas producers future business outlook. With some of the bullishness I've started mentioning from the Oil Service Index (OSX.X) and BJ Services (NYSE:BJS) in recent days, it makes sense to check some oil stocks for signs of bullishness or see what may be taking place there.
I'd show you a chart of Exxon/Mobil (NYSE:XOM), but it's a little boring. A chart of Amerada Hess (NYSE:AHC) by be a little more exciting and offer some better trading. Here's something that is "just the opposite" of what I've been warning bulls to look for. Lets turn the tables and see if we might not be able to warn some bears in the oil patch. Let's use some "bearish vertical counts" to see if a stock may have reached its bottom, but also identify points where we begin to question our analysis and move to the sidelines.
Amerada Hess Chart - $1 box
Just as we've seen some semiconductor related stock achieve bullish price objectives and give some sell signals, it makes sense we might see some beaten down sectors begin achieving some previous bearish counts and begin giving buy signals. What's good for the goose in good for the gander! Shares of Amerada Hess (NYSE:AHC) have achieved an earlier bearish vertical count established back in June/July of $54. The current bearish count is to $40 so bulls need to be careful. A trade at $61 would "negate" the recent bearish vertical count as that trade at $61 (should it happen) would then have us calculating a preliminary bullish vertical count to help assess risk/reward going forward. A 1/2 position bullish at $61 would be followed with a tighter stop at $56. A longer-term investor willing to give the stock a little more room could follow with a stop at $53, which would be a break to knew lows.
Often times, subscribers hear about "rotation" from sector to sector as institutions will remove risk from their accounts in a sector that has had a big move higher, and then seek "value" in a sector that has been beaten down. Point and figure charts can help uncover that type of "sector rotation" using the vertical counts.
The reason I profile ACH as 1/2 bullish long at $61, is that the stock remains below its bearish resistance. The trend is NEGATIVE. If a rally were to take place over the next several months to that bearish trend, an investor/trader may want to have partial exposure.
On "oil service" investor wants to keep an eye on oil and natural gas stocks like AHC. If business is to be strong at the service level, then oil and gas producers need to be drilling and developing their reserves. The only reason for that to happen is for the commodity itself to show price stability or higher price. It's domino theory at work. Most often, stocks move ahead of the commodity. These future observations may also help give us a pulse on the MARKETS perceptions of the economy.