Be Wary of These Oil Names in the Near Term

Anadarko Petroleum stock could be ripe for end-of-quarter selling pressure

Managing Editor
Sep 21, 2017 at 10:29 AM
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The Federal Open Market Committee (FOMC) wrapped up its highly anticipated September meeting yesterday, with the central bank hinting at a December rate hike, and unveiling plans to start unwinding its balance sheet. Ahead of the announcement, we decided to look at the best and worst stocks and sectors during Fed Week.

While gold and silver ETFs tend to do well, the VanEck Vectors Oil Services ETF (OIH) has historically struggled during weeks the FOMC meets, posting the lowest win rate among all other exchange-traded funds (ETFs) that we track, going back to 2015. Among energy stocks, one in particular could also be vulnerable to selling pressure in the short term, if past is prologue: Anadarko Petroleum Corporation (NYSE:APC).

OIH Looks to Buck Bearish Fed-Week Performance

Per data from Schaeffer's Senior Quantitative Analyst Rocky White, OIH has ended Fed Week higher just 29% of the time since 2015 -- the lowest win rate of all -- averaging a loss of 0.2%. Since finding support in the $22 region in mid-August, however, the ETF has been battling back -- closing Wednesday up 1.5% at $25.19. Plus, the shares are now on pace to to end north of their 10- and 20-week moving averages for the first time since January, when the fund was flirting with annual highs. Should OIH finish this week higher, it would buck its trend of poor Fed-Week performances.

Sector Analysis OIH Week

Short sellers, meanwhile, have been piling on OIH amid its longer-term technical troubles. Short interest increased 14.3% in the last two reporting periods to 18.95 million shares, representing 4.4 times the ETF's average daily pace of trading.

Anadarko Petroleum Stock Bounce Could Be Short-Lived

The 28 stocks we track in the oil services sector have shed an average 30% year-to-date, and nearly 10% year-over-year. Anadarko Petroleum stock is staring at a year-to-date deficit of 32%, but is up 6% at $47.52 today, after the company announced a $2.5 billion share buyback program. 

Still, APC has been one of the worst stocks on the S&P 500 Index (SPX) in the past six months. According to data from White, this makes it vulnerable to additional short-term selling pressure as the end of the third quarter nears -- due to a tactic known as "window dressing." 

Regardless of the stock's recent annual low of $39.96, touched on Aug. 29, there has been an overwhelmingly high preference for long calls over puts lately. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day call/put volume ratio of 4.98 for APC, which ranks 4 percentage points from a 52-week high. Should APC resume its long-term downtrend, an exodus of option bulls could exacerbate the stock's technical troubles.

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