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Dr. Kris has two degrees from MIT because one just wasn't enough. Her life goal was to figure out the universe and having done that (at least to her satisfaction), she decided to tackle something even more difficult—the stock market. Applying the scientific method along with an insatiably... More
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  • Market Notes: Drilling For Profit In Oil Servicers -- February 14 5 comments
    Feb 14, 2013 3:11 PM | about stocks: XES, OIH, PXJ, IEZ, SLB, HAL

    3:00 pm ET: The market is still managing to melt up, little by little, despite previous attempts at rolling over. The Dow Transport Index (DTX) still won't take a break and we'll likely not see a pull-back until it does. Market internals are all bullish in spite of negative news from the Eurozone indicating systemic contraction. Many market pundits believe the Euro malaise will spread to our shores and it's only a matter of minutes before we begin to feel their pain. Actually, the time frame is more like a couple of weeks when sequestration begins. I believe that time frame is entirely plausible given that it could take that long for the S&P 500 (SPX) to retest its previous two highs in the 1550 - 1575 range. Once it does that, then all bets are off as to which direction it will proceed. The view right now is that down will be the more likely direction.

    Notable market action: Drilling for profit in oil services stocks
    Oil service and equipment stocks (think drillers) have been on a roll. Today, four oil services and equipment etfs hit new highs: SPDR S&P Oil & Gas Equipment & Services (NYSEARCA:XES), Market Vectors Oil Services (NYSEARCA:OIH), IShares Dow Jones US Oil Equipment (NYSEARCA:IEZ), and Powershares Dynamic Oil & Gas Services (NYSEARCA:PXJ). All jumped by 3%--a gigantic move for these issues. The moves reflect the rallies in their constituent components, most notably Schlumberger (SLB, +4%) and Halliburton (HAL, +7%). The charts of all of these issues suggest there's a lot more upside in the offing and if the opinions of energy experts are to be taken at face value, we can expect the price of oil to continue to rise into summer.

    We've noted that the market may be due for a correction but that shouldn't hurt energy as its price is independent of the stock market. (For one thing oil prices can't be manipulated by the Fed). Now is the time to move into this group and I'd recommend doing your due diligence before deciding on which stocks or etfs to purchase. Each one of the above mentioned funds are based on different underlying indexes, so be careful! For example, the XES invests in a broadly diversified basket of stocks where no individual component comprises more than 3% of the fund. On the other hand, the OIH and the IEZ are both heavily weighted in Schlumberger (NYSE:SLB) and Halliburton (NYSE:HAL). For the OIH, these two stocks comprise a whopping 30% of the fund's holdings and in the case of the IEZ, they make up 25%. All of these etfs pay a dividend, albeit a small one. (The OIH has the highest yield of 0.9%.) The OIH is by far the most heavily traded at over 4M shares per day. It also has a very liquid options field making it a good candidate for a cash-secured put entry and a follow-on covered call strategy.

    Have a happy Valentine's Day--no calorie counting!

    Themes: long ideas, energy, oil, oil services Stocks: XES, OIH, PXJ, IEZ, SLB, HAL
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Comments (5)
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  • Bob de'Long
    , contributor
    Comments (696) | Send Message
     
    Of course, to a real oil man, these oil service stocks are like a pedicurist to a movie star.

     

    It does interest me that you report Schlumberger (SLB) and Halliburton (HAL) are leading the pack. Vertical drilling in West Texas and NE Colorado is rapidly and sharply declining, and being replaced by horizontal drilling. The success in horizontal drilling depends how the drill bit geo-steers in the horizontal sexton and how the horizontal section is fracked. It is high-tech and expensive stuff, at which SLB and Hal excel, relative to the off brands.

     

    In an $8 - $10 million horizontal hole, many firms do not pinch pennies.

     

    Still it’s a question of whether you predict a brighter future for Randolph Scott or his pedicurist.
    14 Feb 2013, 04:22 PM Reply Like
  • Dr. Kris
    , contributor
    Comments (319) | Send Message
     
    Author’s reply » I'd go with his pedicurist as I do believe Randolph Scott is still dead.

     

    Don't both $SLB & $HAL stand to benefit greatly from the expansion in fracking?
    15 Feb 2013, 01:46 PM Reply Like
  • Hillbilly Stock Star
    , contributor
    Comments (729) | Send Message
     
    Rachael G Fox tagged SLB for profit a few days ago, prolly her followers! LoL!
    14 Feb 2013, 07:10 PM Reply Like
  • Ocean Man
    , contributor
    Comments (537) | Send Message
     
    That's funny, I just posted earlier this evening about CJES hitting a new high. That's my favorite in the sector, followed by HP and BAS. I consider them all pretty dangerous though. They can drop by large amounts fast, and this recent rally happened in the face of bad news, misses, warnings, etc.
    14 Feb 2013, 09:49 PM Reply Like
  • Dr. Kris
    , contributor
    Comments (319) | Send Message
     
    Author’s reply » Chart-wise, all of your picks look bullish. And you're right--these stocks are volatile and the not for the feint of heart!
    15 Feb 2013, 01:50 PM Reply Like
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