Buckling Crude Stock Extends Volatile Trading

The equity ran headfirst into the overhead $44-$45 mark in recent weeks

Bernie Schaeffer
Jun 16, 2020 at 2:28 PM
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Following last weeks’ announcement from the Organization for Petroleum and Energy Countries and allies (OPEC+) that revealed a production cut of nearly 10 million barrels per day through July, the energy sector has suffered. Despite this decision out of OPEC+, it still didn’t manage to offset worries of a looming increase in output for a handful of countries. In response, oil stocks have experienced a volatile journey for the second week of June, one that was in tune with Thursday’s broader market selloff.

Ohio-based oil-and-gas based issue Marathon Petroleum Corp (NYSE:MPC) has been no exception, running up a three-day losing streak on Thursday, June 11. But it wasn’t just a losing streak; MPC shed over 17% in that three-day span. Unsurprisingly then, on Thursday the shares seamlessly slid onto the short sale restricted (SSR) list, breaching their 20-day moving average, a trendline that had contained previous pullbacks for the last two months. Looking further back, on Monday, June 8, the equity ran headfirst into the overhead $44-$45 mark, the same level that offered a floor of support in mid-2019. Amidst all of this commotion, MPC is now swimming in a 41% year-to-date deficit.

CotW MPC Dailyw20MA

In the face of these technical troubles, it’s worth digging into MPC’s analyst sentiment. Of the 11 brokerages covering MPC, seven dole out “strong buy” ratings, with zero “sells” on the books. Plus, the consensus 12-month price target of $46.43 is a 25% premium to Friday’s closing perch. This is just a roundabout way of saying that if the oil stock is to encounter more trouble on the charts, it could lead to analysts jumping ship from their bullish stance, and any downgrade and/or price-target cuts could serve as additional headwinds to a stock already sensitive to global headlines.

Breaking down the crude sector in its entirety, data from Schaeffer’s Senior Quantitative Analyst Rocky White shows 27 oil and gas producing stocks sporting an average return of -27.5% in 2020, and -29% over the past 12 months. Digging deeper, 53% of those stocks hold “buy” ratings from analysts, which indicates the entire sector is ripe for a shift in analyst sentiment.

Echoing Marathon stock’s claim as a volatile performer on the charts is its Schaeffer's Volatility Scorecard (SVS) of 97 (out of 100). Specifically, this suggests MPC has been making drastic moves higher or lower since this day in 2019, a potential boon for premium buyers.

Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, June 14.


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