3 Oil Stocks for Bearish Contrarian Traders

It might be time to buy puts on XOM, PTEN, and RIG stocks

by Karee Venema

Published on Aug 14, 2017 at 2:44 PM
Updated on Aug 14, 2017 at 2:54 PM

Crude oil prices plunged last week on signs of rising oil production from the Organization of the Petroleum Exporting Countries (OPEC). Energy stocks have been falling in step with oil prices, though this highlights a broader trend in the sector. However, not everyone is betting against energy -- making for some potentially ideal bearish contrarian trades for oil stocks Exxon Mobil Corporation (NYSE:XOM)Patterson-UTI Energy, Inc. (NASDAQ:PTEN), and Transocean LTD (NYSE:RIG).

In order to whittle the list of S&P 500 Index (SPX) stocks down, Schaeffer's Senior Quantitative Analyst Rocky White used the following criteria:

  • The stock is down over the past 52 weeks.
  • Short interest has decreased over this same time frame.
  • The percentage of analyst "buy" recommendations has increased in the last 12 months.
  • The stock has a Schaeffer's put/call open interest ratio (SOIR) below 1.00, meaning short-term calls outweigh puts.

Short Sellers Jump Ship on Sinking Exxon Mobil Shares

Exxon Mobil stock has shed 13.1% in 2017 -- one of the worst Dow stocks year-to-date -- and is off almost 11% year-over-year. While XOM was last seen trading up 0.3% at $78.35, it came within one penny of matching last Friday's 18-month low of $78.20.

These technical troubles come even as short interest has declined 20% over the past month. While XOM's inability to capitalize on this burst of buying power speaks to its underlying weakness, a rebuilding of bearish bets by short sellers could increase pressure on the shares.

xom stock daily chart august 14

Struggling PTEN Stock Boasts Majority 'Buy' Ratings

Patterson-UTI Energy shares hit a fresh 16-month low of $16.68 earlier, most recently seen trading down 0.9% at $16.68. Longer term, the stock is off 14.1% in the past 12 months -- due to a 44% slide from its Feb. 14 annual high of $29.76.

Despite this sharp slide, the percentage of analysts rating the stock a "buy" has jumped almost 17% over the last 52 weeks. Specifically, 11 out of 17 brokerages maintain a "buy" or better rating, while the average 12-month price target of $25.41 stands at a stiff 51.8% premium to current trading levels. PTEN stock seems overdue for a round of downgrades and/or price-target cuts, which could create more headwinds for the equity.

pten stock daily chart august 14

Short-Term Call Options Hot on Transocean Stock

Transocean shares matched their February 2016 record low of $7.67 on June 21. While the stock has regained some ground in the last eight weeks, it was last seen trading at $8.46 -- down 14.6% year-over-year and nearly 43% in 2017 alone.

Short-term options traders have rarely been as call-skewed in the last 12 months as they are now, per RIG's SOIR of 0.59 -- in the 2nd annual percentile. Drilling down, heavy accumulations of call open interest in the front three-months' series is found at the overhead 9 and 10 strikes. This could translate into options-related resistance for RIG stock, as the hedges related to these bets unwind ahead of expiration.

rig stock options open interest august 14


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