Philadelphia Oil Service Sector Index (OSX)

Oil Services Sector Approaches Key Resistance; Can It Break Higher?

Posted in Philadelphia Oil Service Sector Index (OSX) on April 7th, 2014 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

On weekly bar charts, the Philadelphia Oil Service Sector Index (OSX) is now approaching a test of key “cross” trend line resistance located at the 299 level. With overbought conditions present as well, a technical setup such as this would normally argue for a correction to occur after key resistance is tested. Moreover, a number of fundamental energy analysts are now suggesting that a sharp pullback in oil prices could emerge soon. If it does, a rejection of price from the 299 level could paint a troubling picture for oil companies in general.

Nevertheless, from a technical point of view there are a number of the components within the OSX index that appear poised to move higher. Clearly Diamond Offshore Drilling, Inc. (DO) and Transocean Ltd. (RIG) are each in oversold conditions, having been crushed by the BP Gulf of Mexico oil spill in 2010. Still, both are near their 10-year price lows and are each responding with basing price activity. Others, such as Weatherford International Ltd. (WFT), Rowan Companies (RDC) and Ensco (ESV) have already rebounded from their respective lows and appear to be in position to extend much higher.

Clearly, names like Halliburton (HAL) and Helmerich & Payne, Inc. (HP) have soared since their lows of June 2012 with momentum investors still involved. As a result, a test of key resistance at 299 on the Philadelphia Oil Service Sector Index (OSX) could be met with profit taking. On the proverbial other hand, a solid break above 299 could propel the OSX to much higher levels and possibly take aim at an eventual test of key trend line resistance currently sitting near the 358 level (but rises over time).

Oil Service Sector Continues To Climb With More Upside Likely

Posted in Philadelphia Oil Service Sector Index (OSX) on September 12th, 2013 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

Although overbought conditions persist on long-term charts, the Philadelphia Oil Service Sector Index (OSX) continues to climb in a steady, plodding fashion. A modestly improving domestic economy combined with a series of better-than-expected economic data from both Europe and China are also supportive to the oil service sector by themselves. Still, plentiful supplies of crude oil combined with modest demand could mitigate any thoughts of a sharply rising energy prices under normal circumstances.

A growing unease over the prospect of a military strike against Syria combined with the uncertainty associated over the myriad of “what if” consequences that could occur in the aftermath of such a strike, however, make this situation a lot less than normal and could have a direct impact on the oil service sector.

History shows that the direction of oil prices and the demand for oil service sector equities have risen prior to past confrontations in the Middle East. It has also been typical that once the missiles begin to fly, the price of oil and oil sector stocks decline as well.

Some will say that this time is different. With a no boots-on-the-ground approach to the Syrian conflict combined with a preordained limited scope, many observers, analysts and traders could remain mired in uncertainty even after a strike begins due to a global reluctance to get involved and with ubiquitous worries that an expansion of regional unrest could result.

Technically, the OSX is in an overbought condition but will not find major resistance until testing key trend line resistance at the 287.50 level, which represents a 7.5% gain from the end of trading last week. Further, an unexpected break above 287.50 would likely create addition drag on consumer spending and the economy as the cost of transportation and the cost of heating homes rise.

It may be needless to say that as this week begins there appear to be too many questions accompanied by too few answers to temper this growing unease.