The strong fundamentals of the oil markets are trumping the technicals and even the overly-positive sentiment. While my call for a top in energy stocks seemed to have all the components lined up, the strong earnings report from Schlumberger (SLB) and the weakness in tech stocks threw a wrench into the plan. SLB beat earnings by $0.11 with revenues rising an impressive 21.0% year/year to $3.43 bln vs the $3.21 bln consensus.
SLB can easily hit $82 according to a measurement on the chart.
The OSX won't hit the top of the channel until it gets to $163 - $164.
The 'bearish' oil case has something of an issue in that most stocks appear to discount oil at around $35 which, as the oil bears will tell you, will be somewhat ahead of the 2005 closing price. In the meantime, good/great earnings, particularly in this season, will keep the complex supported. I hope. I know SLB is service rather than oil, but it's pretty obvious that the spending wouldn't start until their customers realized that $40/$50/$60 is/was "real". I see the group as a trailing, rather than a leading indicator; and I'm holding XLE through June earnings season at least. I'll start looking at stop losses at $50...fear and greed and all that stuff.
Posted by: Greg Newton | July 22, 2005 at 12:23 PM