Here we go again. Another week deeper into winter, another polar vortex on the way. I give up. I’ve been screaming “Uncle” for a month and a half already, as has much of the country. The news headlines have been plastered with cold weather stories, as have excuses for weak economic data and earnings by many companies. You may have heard of the huge rally Nat Gas has had but what has been a little quieter is the recent rally in Crude Oil.
Crude started the year off around $91 per barrel and today sits firmly above $100 at $102.18. While Nat Gas historically heats up in the winter, Crude’s rally often comes as the weather warms and people start firing up the old woody wagon for cross-country trips. Last year Crude ran from an April low of $86.90 to a late August high of $111.01. If Crude continues to rally, which stocks stand to gain the most?
Looking at the Zack’s Industry Rank, the oil refiners rank in the top 20% of the 265 industries we rank. Most of the other oil related fields aren’t even in the top 50%, so this is a great place to start. Independent refiner CVR Energy (CVI) is a Zacks Rank #2 (Buy) and pays a healthy 8% dividend. Earnings estimates have historically bounced all over the place for this stock but recently have been turning upwards.
A glance at the chart shows a stock that was in the doldrums around $20 until a spark was lit last year, rocketing to nearly $48 towards year end. After a wild start to this year, it looks like things are calming down a bit. Hopefully it’s the calm before the storm. Here we have stochastics oversold and ready to trigger a buy. CVR is a far cry from $48, trading ten bucks below at $38 today. We’re flirting with the 25×5 here, trading just under it.
Marathon Petroleum (MPC) is a Zacks Rank #2 (Buy) in the same industry. Six analysts have raised current year earnings estimates in the last month, bumping up consensus from $9.15 to $10.02. The stock has made a big run since October’s low of $61.32, trading at $87.50 today. In the short term the rally seems a bit overbought given the stochastics reading above 80. A safer strategy for Marathon would be to wait for a pull back to the $82 range. This marathon may be taking a breather after already logging 26.2 miles.
One of the nation’s top refiners, Valero Energy Corp (VLO) is a third stock to keep an eye on in this space. It seems like every stock in this industry shares the same story. There have been big runs in these stocks since October, they all have earnings revisions to the upside, and they all look a little over done right now. This is far from the Valero I remember when it traded in the teens a few short years ago. Given the spike in the stock, we can use Fibonacci retracement levels to find potential areas to buy again in the future.
The first step on the way down, the 23.6% at $48.86 provided support for four days in January before letting go. Next floor down was the 38.2% at $45.87 which held in early February. If VLO comes down again then $45.87 is certainly an area to for support. A short term buy could be triggered if the stochastics cross bullish while in oversold territory. If not, the next step down is $43.46. VLO like MPC seems a bit over bought, while CVR may be the best looking chart of the three.
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