Weatherford International (WFRD) – $7B market cap – Technical: The stock is forming the right side of a stage-one cup base.
Aggressive entry can be taken at current levels as the stock is reclaiming its 50-DMA. An ideal entry point is on a break above the pivot
of $100.9 (+5%). Solid fundamental profile: EPS Rank of 83, Composite Rating of 97, and SMR Rating of B. Good technical profile:
RS line has started to trend upward, with a high RS Rating of 95. Up/Down Volume ratio of 1.3 and a positive turn in A/D Rating this
week denote buying interest
Author: Kenley Scott
Kenley Scott is a senior equity analyst and sector strategist covering the APAC region and the Energy sector. He is a member of the Global Focus List Committee, which approves all equity recommendations for developed, emerging, and frontier markets. Kenley also writes the Global Sector Summary, part of the Sector Strategy service, which identifies emerging sector strength and weakness across 46 countries every week. After working as a commodities broker, Kenley joined the firm in July 2006. He has a B.S. in Statistics from the University of California, Riverside and also holds a Series 65 securities license.
Global Sector Strategy
Key Points:
- Large-cap indices have clearly risen into 52-week highs, with the Dow at all-time highs. Small/midcaps are testing key resistance from prior peaks over the past 15 months.
- Breadth (stocks above 30-WMA) has risen from below 20% to nearly 75% in seven weeks. Peak in breadth tends to come between 75–85%, with exceptional cases ~90%.
- Russell 2000 joining in has been the largest factor in rising breadth. Looking at the Russell, it has risen ~20% in seven weeks.
- Since 1987, a 20% rise over the trailing five-week (35 trailing days) period is rare, occurring less than 1% of the time. Also, many of the instances were bunched together (mostly in 1991, 2009, and 2020).
- When this occurs, forward returns have been exceptional.
O’Neil Energy/Material Weekly
Brenntag (BNRX.DE) – $13B market cap; – Technical: The stock broke out of a stage-one cup base into new 52-week highs. It is trading
within the pivot range and is actionable. Fundamental profile: EPS Rank 63, Composite Rating of 77, and SMR Rating of C. EPS growth
estimates for FY23 and FY24 are being revised upward
O’Neil Energy/Material Weekly
Sherwin Williams (SHW) – $74B market cap – Technical: The stock is breaking out of a stage-one cup base and is scaling a new 52-week
high. Excellent fundamental profile with an EPS Rank of 91, Composite Rating of 87, and the best possible SMR Rating of A. The stock is
witnessing multiple upward revisions in its FY23 and FY24 EPS growth estimates. Improving technical profile: RS line is near year-to-date highs,
with RS Rating improving to 86 from 64 in the past six weeks
O’Neil Energy/Material Weekly
Gold prices are once again testing the upper end of a range that has been established over the past three years. The all-time high intraday price is $2,085 from August 2020, while the highest closing price is $2,067, also from August 2020. Prices then failed in two attempts to break through those highs, in March 2022 and April 2023. This week, a break above $2,060 came on Thursday, leaving only very minor overhead remaining.
Global Sector Strategy
Key Points:
- Another strong week of breakouts last week, following a large spike two weeks ago.
- Looking back at the past 23+ years, when a spike in breakouts occur, it tends to fit in three categories:
1. Market uptrend beginning or ongoing.
a. Key here is solid 4-8 week forward gains and additional breakout spikes soon thereafter. Ex: November 2016.
2. Headfake occurring.
a. Most likely breakdown evident within a few weeks. Ex: May 2001.
3. End to longer rally occurring.
a. Longer topping process, but within 3 months should be evident. Ex: November 2021.
Global Sector Strategy
Key Points:
- Revisiting FTD study.
- On the S&P 500, there have been 34 corrections of at least 9% and to below the 200-DMA since 1970. Of these:
- Scenario One – Eighteen had a first FTD, which resulted in the continuation of the bull market and eventual new highs.
O’Neil Energy/Material Weekly
Par Pacific Holdings (PARR) – $2B market cap – Technicals: The stock is breaking above the midpoint resistance of a stage-four
consolidation base (pivot: $37.50). It has retaken its 50-DMA and its technical ratings have improved this week. The RS line is trading sideways
near multi-year highs. Aggressive entry or later on a break above its pivot. Company Description: PARR is a diversified energy infra company
which majorly refines oil.
Global Sector Strategy
Key Points:
- Rally of the past two weeks has led to a net gain for indices as well as the median stock post-Q3 earnings report.
- Unlike the setup of Q1 and Q2, the market sold off into earnings this quarter. Despite starting with losses in the first couple of weeks of reporting, the S&P 500 is now up a net of 2% since earnings began.
- The median S&P 500 stock is also up about 2% since reporting earnings.
- In terms of Q3 results, those with both the biggest beats and biggest positive reactions include Capital Equipment, Consumer Cyclical, and Technology. Energy and Transportation have had the only negative reactions.
O’Neil Energy/Material Weekly
nternational Seaways (INSW) – $2.3B market cap – Technical: The stock broke out of a stage-two cup-with-handle base on above average
volume and is trading slightly below the pivot. Pivot range of $48.4–50.8. Moderate fundamental profile: EPS Rank 45. Composite Rating of 95.
SMR Rating of B. Excellent technical profile: Upward-sloping RS line with a high RS Rating of 90. Up/Down Volume ratio has remained above 1
in the past eight weeks, along with an A/D Rating of B+, denoting good money flows in recent weeks. Institutional sponsorship has increased
33% y/y to 375 funds as of September.
