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Positives For Oil Stocks

Oil jumped higher for the second straight day today.  A major pivot low on the oil chart from July 2009 was hit on Tuesday around $68 dollars a barrel. From that level, oil closed at the highs of the day on Tuesday.  This created a bullish double bottom and pivot low.  The last two days, solid gains followed.  While oil is seeing these big gains, oil stocks are also rocketing higher.  Exxon Mobil Corporation (NYSE:XOM) is jumping more than 2.5% while Chevron Corporation (NYSE:CVX) is up more than 3% on the day.  In recent weeks, spot crude has dropped approximately 25% from the highs.  This size drop killed oil stocks like Exxon Mobil and Chevron.  Today, with oil up for the second straight day, these stocks are soaring.

In addition to the recent drop in oil, the catastrophic oil spill in the Gulf of Mexico hurt oil companies as well.  The driller BP plc (NYSE:BP) has taken the brunt of the hurt in their stock price but other companies like Transocean LTD (NYSE:RIG) have also been severely hit. Even Exxon and Chevron have been hurt slightly over future drilling prospects.  Positive news has been leaking out (pun intended) that the oil spill may have stopped.  This is great news for the oil companies as a whole as the negative press may start to subside.  In addition, BP is jumping almost 7% and Transocean is up 6% on the day.  Happy days are here again for the oil stocks, at least for today.

Gareth Soloway
Chief Market Strategist