The Technical Indicator to Watch for OIH

After a breakout year in 2016, OIH faces potential technical obstacles on the charts

Editor-in-Chief
Jan 17, 2017 at 10:59 AM
facebook X logo linkedin


It was a good year for the VanEck Vectors Oil Services ETF (OIH) in 2016. The exchange-traded fund (ETF) added more than 26%, even as net outflows exceeded $119 million for the calendar year (per etf.com). OIH's most impressive gains came in the eleventh hour, with the fund finally hurdling above the $30 region in December -- the round-number area that plays host to several key price points, including: OIH's all-time half-high ($29); a 23.6% Fibonacci retracement of the July 2014 peak to the January 2016 low ($29.32); and the 20% year-to-date return for 2016 ($31.74).

From its Sept. 27 near-term low of $26.10 to the time of this writing, OIH's rise has been supported by net inflows to the tune of $214.23 million. Narrowing our focus to more recent weeks, however, the fund has registered net outflows of $78.62 million from its Dec. 12 near-term high of $36.35, and OIH shares have spent the majority of 2017 so far sandwiched in a tight channel between $34 and $35.

Meanwhile, total put open interest on OIH has ballooned to 226,183 contracts -- an accumulation that falls just shy of the current 52-week high of 243,917, per Trade-Alert, with the current total arriving in the 99th annual percentile. The number of OIH puts in open interest nearly doubles that of calls, with current call open interest on the fund arriving at 114,037, in the very average 48th percentile of its annual range.

oih daily open interest 0113

But it would be inaccurate to point to this recent surge in put open interest as a clear sign of rising investor anxiety toward OIH. As of Friday morning, 30-day at-the-money implied volatility on OIH was docked at a modest 25.2% -- lower than 99% of other such readings from the past year, according to Trade-Alert -- while the 30-day implied volatility skew of 9.8% stood in the 7th annual percentile. With the CBOE Volatility Index (VIX) itself hovering around annual-low levels, the low volatility priced into OIH options could be fairly described as "unremarkable" in more ways than one.

And it seems that the recent uptick in put open interest on OIH is not necessarily attributable to option bears, anyway. The fund's July 30 put attracted the largest increase in open interest over the past 10 days, with more than 10,000 contracts added over this time frame -- all thanks to one massive trade on Jan. 5, which data from the major options exchanges confirms was of the sell-to-open variety. By selling premium at OIH's July 30 put, the trader is looking for the shares to remain above this critical round number through the first half of the year.

If this speculative player shied away from expressing a bullish view on OIH via call purchases, perhaps it's due to the potential obstacles lying overhead. Just a chip-shot away from OIH's Friday close at $33.96 are two notable price points: $36.12, which is 150% north of the January 2016 all-time low; and $36.68, the current 160-week moving average.

Plus, technicians will want to keep an eye on OIH's Relative Momentum Index (RMI). The RMI registers at 75.39, down from its recent peak at 76.05 -- and previously, when OIH's RMI has retreated back below the 70 threshold from a trip above, it's been a short-term selling opportunity.

oih weekly 0113



Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday morning. Sign up for this free weekly newsletter to get exclusive early access to Bernie's latest research.
 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI