Market Overview

Big Bottom For Big Oil?

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Delta Derivatives is out with a research note after Tuesday's close, stating that shares of mega-cap integrated oil names, such as Chevron Corporation (NYSE: CVX), Exxon Mobil Corporation (NYSE: XOM) and ConocoPhillips (NYSE: COP) may have put in a significant technical bottom.

In the research piece, Delta Derivatives highlights several key takeaways:

  • Yield on both Chevron and ConocoPhillips exceed 5 percent, compared to a 2.14 percent yield on the U.S. 10-year. This comparative differential is at the highest level over the past 20 years.
  • Shares of Big Oil all opened sharply lower on the day, only to close and finish near the highs, even with crude oil down nearly 4 percent. This points to a key technical reversal.
  • Chevron has closed lower 15 straight weeks, with ConocoPhillips closing lower 14 out of the last 15 and Exxon 13 out of the last 15. In the case of Chevron, the previous worst weekly losing streak since 1970 was five consecutive weeks, so 13 straight is reaching extreme levels.
  • Nine-day weekly RSI readings lower now than even during the Financial Crisis, indicating an extremely oversold condition.
  • Implied volatility is in the 90th percentile, pointing to heightened fears. From a contrarian standpoint, high levels of implied volatility many times are associated with intermediate lows in shares prices.

Related Link: Oil Demand In China Has Never Been Higher

Chevron closed at $85.78, down $0.11, with a low on the day of $83.60.

ConocoPhillips closed at $50.40, up $0.20, with a low on the day of $49.06.

Exxon closed at $77.49, down $0.53, with a low on the day of $76.33 (yearly low).

Posted-In: OilLong Ideas Technicals Commodities Options Markets Trading Ideas


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