3 Charts to Watch Once Oil Recovers

NFX, MPC, and TSO could be good stocks to own when oil turns around

by Andrea Kramer

Published on Jan 20, 2016 at 12:39 PM
Updated on Jun 24, 2020 at 10:16 AM

If history is any indicator, the worst-performing stocks during a severe market pullback often generate the healthiest returns once that pullback is over, according to Schaeffer's Senior Quantitative Analyst Rocky White. Among the stocks that fit White's criteria -- and could be good stocks to own on a turnaround -- were three oil names: Newfield Exploration Co. (NYSE:NFX), Marathon Petroleum Corp (NYSE:MPC), and Tesoro Corporation (NYSE:TSO). So, when crude finally finds a floor, should you hop in on NFX, MPC, and TSO?

Considering crude's collapse, it's no surprise to find NFX in the red. The stock was last seen 8.4% lower at $22.33, and just off a new two-year low of $22.20. Along with Under Armour Inc (NYSE:UA), NFX was the only S&P 500 Index (SPX) component to fit White's bill, dropping roughly 45% since its November highs north of $41. However, NFX could find a familiar floor in the $22-$24 region, which has contained pullbacks over the past four years.

160120NFX


Another rebound could send quite a few bears running for cover, too. The stock's Schaeffer's put/call open interest ratio (SOIR) sits at an annual high of 2.24, indicating that near-term option players haven't been more put-biased during the past year. 

Echoing that, the equity has racked up a 10-day put/call volume ratio of 2.75 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio is higher than 68% of all other readings from the past year, pointing to a healthier-than-usual appetite for bearish bets during the past two weeks.

MPC is also swimming in red ink, due to sinking oil prices and reports of a cold weather outage at one of its Kentucky refineries. The shares were last seen 4.2% lower at $39.47, but as with NFX, could find a familiar foothold. Specifically, the $38-$40 neighborhood has contained MPC's retreats since mid-2014.

160120MPC


Once again, it's no surprise to find most option players are wary of MPC -- pointing to a mass of sideline cash, should White's stats ring true again. The equity's SOIR of 1.15 is higher than more than three-quarters of all readings from the past year, and its 50-day ISE/CBOE/PHLX put/call volume ratio of 3.36 ranks in the 91st percentile of its annual range.

Finally, TSO is lower with its sector peers -- and in spite of plans to run more crude from biomass --  down 6.4% at $83.90. The shares could find a foothold atop their 20-month moving average, which has acted as a lifeline on several occasions since late 2010.


160120TSO


TSO option buyers have picked up puts over calls at a near annual-high clip during the past two weeks. The security's 10-day put/call volume ratio of 6.92 ranks in the 99th percentile of its annual range. Meanwhile, short interest grew by 10.9% during the most recent reporting period, and now represents about a week's worth of pent-up buying demand, at TSO's average pace of trading.

In conclusion, while Newfield Exploration Co. (NYSE:NFX), Marathon Petroleum Corp (NYSE:MPC), and Tesoro Corporation (NYSE:TSO) might not look too pretty on the charts right now, they -- along with these travel stocks -- could generate notable gains once we find a bottom, according to White's aforementioned study. All three oil stocks are flirting with familiar support, and there's plenty of pessimism to unwind in the face of a turnaround.

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