Wednesday, June 18, 2014
Oil and Gas Stocks to Buy Now
It’s that time of year again. The time for barbeques, swimming pools, and pain at the pump. Oil is fairly cyclical and historically heats up with the weather. This year we’ve already seen crude oil break up over $106 per barrel for West Texas Intermediate. When the summer driving season gets into full swing you can expect crude to run up even higher. I have three great stocks to buy to cash in on the oil rally.
Crude Technical Analysis
All of a sudden crude is back into the conversation. A little bit of trouble in Northern Iraq and now we’re all worried about Texas Tea. Last time I checked, Crude below $110 isn’t a big deal. Crude at $125 may be but we are a far cry from that. Don’t forget that seasonally things heat up for Crude around this time of year.
Crude has been on a run up from below $90 in January to $106.70 today. The spike up on the Iraq news is still well below where Crude traded during the Libyan conflict. Still, the move puts the late 2013 highs in focus.
Aside from a few dips along the way, Crude has been in a firm uptrend all year as the world economy has continued its tepid recovery. Swings to the downside have been limited to about $7 from peak to trough. The breakout from the March 2014 high now sits at the July 2013 highs. Expect some follow-through tomorrow as well as volatility in the weeks to come.
Note the bullish trend line support that was tested in March and April. Now couple this with the firm top set from the March high and you’ve got a very bullish pattern that just has been broken. Now crude prices above $103.46 keep crude on a bullish bias. Look for crude to fill the gap it made today. Right now with a close near the highs it implies further upside in the short term.
C&J Energy Services (CJES - Trend Report Chart)
C&J Energy is a provider of hydraulic fracturing and coiled tubing services with a focus on complex, technically demanding well completions. The company has been strengthening operations in the Eagle Ford and Permian Basins and expanding its presence in the Bakken and Marcellus Shale. C&J targets high volume, high efficiency customers who recognize the value that C&J provides through efficiency gains that result in significant cost savings.
This Zacks Rank #1 (Strong Buy) has seen six analysts raise current fiscal year earnings estimates over the last 60 days. This helped raise consensus from $1.11 to $1.19 per share. Earnings have been coming in mixed over the last several quarters compared with consensus estimates. Last quarter CJES surprised to the upside by 4 cents, but two quarters in a row prior it missed by 10 and 11 cents respectively.
The technical chart shows a strong stock that has been consistently gaining ground since 2014 kicked off. After breaking above the 25 day moving average shifted by 5 days (25x5) CJES has kept making higher highs all year. The recent pullback to the 25x5 in late May offered up a buying opportunity as the stock regrouped before heading higher. Now CJES is breaking out to a fresh 52 week high again above $32.50.
Pioneer Energy (PES - Trend Report Chart)
Pioneer is a drilling and production services company that operates in the US and Columbia. PES has exposure to the full well life cycle including drilling, completions, workovers and on-going well maintenance. Approximately 60% of US revenue is attributable to the Bakken, Eagle Ford, and Permian. There are accretive organic growth opportunities in all four of Pioneer’s core service lines.
Of the top-tier well servicing providers Pioneer has the highest utilization rate, highest average hourly rate, highest average horsepower fleet and the highest percentage of taller mast rigs. They are also a significant player in the offshore coiled tubing market.
Pioneer is a Zacks Rank #1(Strong Buy) stock that has seen estimates for next year raised by three analysts in the last 60 days. This has helped push the consensus for next year up from 16 cents per share all the way to 43 cents. Pioneer has beat estimates every quarter for the last 6 quarters in a row.
The technical chart for PES looks a whole lot like the chart we just looked at for CJES. Similar story with the stock breaking above its 25x5 early in the year and rallying ever since. PES has already doubled this year and looks poised to add even more. 52 week highs seem to be broken nearly every day. The stochastics are a bit overbought on PES so there may be a slight pullback looming. Trend line support from the 25x5 currently sits down at $15.37.
Encana (ECA - Trend Report Chart)
Encana is a turnaround story in the oil and natural gas industry. They are a leading North American resource play with a disciplined focus on generating profitable growth and growing shareholder value. Their goal is to target 75% of their upstream operating cash flow from liquids over the next few years.
Encana has been replacing natural gas production with high-margin liquids. Recently they added the Eagle Ford shale as their 6th core growth play. They’ve sold their Jonah and East Texas assets, getting $1.8 billion for Jonah and $530 million for East Texas.
Analysts apparently agree with management’s game plan as six analysts have raised their estimates for the current year and next year. This helped push consensus up from 94 cents to $1.55 for this year and up from $1.11 to $1.63 for next year. These revisions have helped to push ECA to a Zacks Rank #1 (Strong Buy).
ECA has recently been breaking out after pulling back to support and consolidating from mid-April to the end of May. The breakout above $24 is in infantile stages. With earnings coming up in about a month, ECA could very likely track upwards ahead of expectations for a good earnings report. Right now stochastics are a bit overbought after the rally up through consolidation.
Should crude oil continue its run, energy companies will likely benefit. These three stocks are all Zacks Rank #1 (Strong Buy) ideas to profit on the move.
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