Could These 2 Oil Stocks Bounce?

Although it's a tough time for oil, BP plc (ADR) (NYSE:BP) and Newfield Exploration Co. (NYSE:NFX) are approaching historically supportive trendlines

by Josh Selway

Published on Dec 3, 2015 at 1:31 PM
Updated on Jun 24, 2020 at 10:16 AM

It's no secret that oil's been struggling lately, with liquid gold closing below $40 a barrel on Wednesday. However, futures are moving higher as the Organization of Petroleum Exporting Countries (OPEC) convenes, and, what's more, the recent drop in the energy sector could present buying opportunities. Below, we'll take a look at two stocks -- BP plc (ADR) (NYSE:BP) and Newfield Exploration Co. (NYSE:NFX) -- that, from a technical and sentiment perspective, could be due for a short-term bounce. 

Despite the rebound in oil futuresBP is off 1.6% today at $33.28, falling in step with European equities. These losses bring the stock's year-to-date deficit to 12.7%. However, the shares recently met their 80-day moving average, which, historically, has been a positive occurrence. The six previous times BP pulled back to this trendline, it's averaged a 21-day gain of 1.4%, according to Schaeffer's Senior Quantitative Analyst Rocky White. What's more, over that same time frame, the shares have moved higher two-thirds of the time following a signal. 

Also potentially working in the stock's favor is the sudden affinity for puts at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Across these exchanges, BP plc (ADR) sports a 50-day put/call volume ratio of 0.58, a mark that tops 80% of all others from the past 12 months. If some of these fresh bearish speculators make a quick exit, it could provide BP with a much-needed lift. 

Shifting gears, NFX is looking strong today, picking up 1.9% to sit at $37.87, as it adds to its 12-month lead of 44.7%. Additionally, the shares' 80-day moving average is approaching underneath -- a trendline that's acted as a short-term springboard in the past. Specifically, the last six times this trendline has come into play, NFX has put in positive five-day run 67% of the time, gaining 1.6% on average. 

When looking at Newfield Exploration Co.'s options data, the bullish case becomes even more appealing. For instance, at the ISE, CBOE, PHLX, NFX has amassed a 50-day put/call volume ratio of 3.74 -- meaning almost four puts have been bought to open for each call. Furthermore, this ratio outranks 86% of all others from the past year. And then there's NFX's Schaeffer's put/call open interest ratio (SOIR). At 1.16, this reading stands at an annual high, meaning short-term option traders are more put-skewed now than at any point during the last year. All in all, an unwinding of this pessimistic behavior in the option pits could spark gains in the near term for the shares. 

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