Energy stocks are down 20-30% for the year with valuation below the levels when oil was trading @30$/barrel. From that perspective they look attractive but it can easily be a value trap. Does anyone have a thorough view?





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2 Comments so far

  1. alex on March 2, 2020 9:37 am

    i share the same opinion. value trap. no dividend is going to compensate for the fact that the sector could go down another 50%. XLE chart is really ugly.

    revenues are impossible to forecast while costs are very real. + the burden of turning around these gigantic companies with tens of thousands of employees worldwide.

    it’s very difficult for huge corporations like this to turn around , change the business model, reinvent themselves.

    some upstream projects have 20-30 years amortization schedules. the newest projects in the LNG space have seen their costs runaway while the underlying commodity is at an all time low. long term contracts are being renegotiated by the customers while the market is moving away from fossil fuels and cars are becoming self driven and electric.

    road transportation was 50% of the demand in 2017 according to OCDE stats. petchem 15%

  2. none on March 10, 2020 1:56 pm

    Allow the CL market to close out for the month of March 2020.

    As, this action in price is a test of the long term trading range high point during the decade of the 1980’s and 90’s.

    The recent trading range in affect today is the low of 08/2015 37.75 and the high of 05/2015 62.58. This action in the month of March 2020 is a breakout lower of that range, a monthly ‘close’ latter under March 2020 low point will be consider an ‘inflection point’.

    Inflection points are a place when the market trend will continue at a trading range break out point or reverse back into the range.

    At this point the low of the TR 37.75 becomes ‘overhead supply’ and should lead towards the start of a major bull market upon breakout.

    Take special note:

    Of the recent ‘contract low breakout’ 48.05 level front J.

    Below are notes of such market actions.

    Breaking of contract highs/lows are inflection point towards volatility. Long term option ‘writing’ that has been taking place are, and have a greater risk factor towards the break away from extreme contract highs and lows (all time contract highs and lows).

    As, we have seen in the recent 2018 NG markets many have been ‘writing’ options during a large trading range collecting premium, contract lows and highs are places where sellers of options become a much larger ‘risk’ towards investment capital once the ‘break away’ happens, they become or are at the ‘mercy of the market’ to a larger degree.

    Update 03042020:

    Recent front SP contracts continue to have their contract low point at the recent 2019 Xmas low point, but the INDU (YM) index (30 stocks) have recently broke their contract low point last week, this is the action towards a long 2 year trading range. Passive investing (the ‘writing of put/call’ options to collect premium along with extreme bearish/bullish sentiment) has cause an immediate reaction to such investing, and the cause of the speed of the market decline being mention recently.

    The INDU is 10%+/- away from the Xmas 2019 low point and already having its front YM contract trading and breaking its contract low.

    Severe downward pressure is not being contain, it is expanding by leaps and bounds.

    Update 02142020:

    The trading range in JYP is quite an extreme towards ‘no volatility’ this is a haven for risk takers towards collecting ‘naked option premium’, this is coming to a close. As, the NG long term trading range a year ago when it hit its ‘contract high’ point of no return.

    NG option writing wipe out is seen when NG high its inflection point late 2018, a few firms went under.

    107 JYP is an important volatility level.


    Update 08/12/2019:

    GC has just hit its ‘contract high’ in the front month 08/12/2019, contract highs and lows are a very important levels.

    Such as a contract high ‘target’ hit in NG 10/02/2018, these levels are associated with over head supply or an extreme demand element towards value.

    Observe all the majors in the currency markets (AD,BP,CD,EC,DXY.JPY) have been in a long term trading range, this action moves options traders into ‘selling options to collect option premium’ over a greater then average normal length of time. It moves the general thinking of the markets towards a passive type of outlook to earn.

    Update 08282015:

    Buy Signal ZB U5 contract 30/10 year yield new lows coming 08282015

    World interest rate market in the Euro Dollar created a new all time low this week, as the contract created a new all time high. This is a major non conformation towards the 30/10 USA yield to move lower and create a new all time low in yield.


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