Energy Sector at Most Oversold Levels of Last 18 Months

The S&P 500 energy sector is now at its theoretical low, and for oil bulls, may present an opportunity.  The model shown below indicates that the energy sector is the most oversold it has been in the last 18 months. 

As we have seen again and again with financial stocks, this does not mean that the sector can't continue lower, and a further breakdown in oil may facilitate that, but oil bulls can expect a bounce.

click to enlarge

Below is a list of oversold stocks on the S&P 500 oil & gas group.

Comments

[Consider_this:]

Stretch it out beyond 18 months and the chart paints a different picture...

We've been in a crazy energy run for about 2 years now; a little pullback is to be expected.

However, depending on whether we're going to continue this energy run or just trade sideways, or whether this is going down like the rest of the market when recession is confirmed and priced in, is the real unknown here.

In the last 18 months, energy sector is on a run that assumes prices always go up and demand will continue to be tight. If recession or depression becomes reality, the demand will continue to slacken as prices drops -- and that's the risk for this sector.

2008 Jul 21 01:54 PM

[Chubbs:]

That's funny,rhymes "when the recession is confirmed and priced in."

2008 Jul 21 06:31 PM

[Emerald:]

Long term fundamentals suggest there are good buying opportunities today on the recent pullback.

2008 Jul 22 02:58 PM