oil

One of the main drivers of the S&P/ASX 200’s bullish trend is the Energy sector. This GICS sector (ASX: XEJ) includes explorers, producers, marketers, refiners and transporters of oil, coal, gas and other consumable fuels.

Oppositely to the main stock indices that started rebounding in March this year, the XEJ index hit a low and bounced back several months earlier, in last November (point B on the chart). This low was posted on November 21 at 10,497.9 points in intraday session. Yesterday the XEJ closed at 16,550.10 points after reaching a high of 16,804.20 points.

This means that it has already rebounded by 60% since last November. And it is probably not finished yet.

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Mermaid Marine is a services provider to the offshore oil and gas industry. This stock (ASX: MRM) has been bouncing back continuously since it posted a low at $0.65 in last November (point A on the chart). It actually peaked last Monday at $2.45 (point B), and has corrected to $2.25 yesterday at the closing price.

The bullish trend between points A and B has driven the stock 277% higher in 8 months and a half. Oppositely to many materials, industrials or energy-related stocks that also sharply rebounded during the last months, MRM has climbed much higher than its previous highs of 2008.

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It seems that June 12 this year has been an important date on the financial markets. From this date, across markets and places all around the world (commodities, stocks, indices and also currency pairs), investors have switched on the downside.

The bullish trends have exhausted almost on every asset that had taken advantage of the rebounds generated in March. This is the case for Oil.

The price action failed to break a resistance level set at $73. This level has been hit 4 times in June but eventually held. As a result, oil price has already corrected by 8.5%. There are no obvious support levels before $54, which is 18% lower than the current price. It could be the target for bear investors in the coming weeks.

The level of $54 is technically important as it is a significant previous high (point A on the chart) posted in late March this year. It was cleared by the rally triggered in early May. Technical analysts and traders will pay attention to this level as it may typically become a new low.

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The oil and gas exploration and production company’s stock (ASX: STO) has been experiencing a positive year so far. Since last October actually. Two technical reasons however argue for a coming retracement, probably within the next few weeks.

STO has been rising from the low point posted on October 17 at $9.32 (point F on the chart). A recent high was posted on March 27 at $16.58, therefore 78% higher than point E. This is where a resistance line capped the price action. This resistance is a descending line that goes through the historical high price posted last year in June (point A) and through lower highs posted during the last 12 months (points B, C, D and E).

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Last month, a new attempt to clear this resistance line failed on point E, at $16.06. A sharp pull-back drove back to the stock to $13.48 (-16%) one week later. The stock rose back during the last month to reach $15 last Friday. However the long-term resistance is likely to hold and prevent a
further rise above $15.5. The upside seems consequently to be limited.

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