West Texas Intermediate Crude peaked last September around $95. Shares of energy companies such as Apache (APA) did so as well poking just above $45. Crude oil bottomed in December at $68. It is now exhibiting a series of higher lows and higher highs. The 200 day moving average is $77.37 and Thursday’s close was $77.59. The moving averages appear to be converging in a couple of weeks. The next level of resistance is the mid 80s so that is a near term target.
Unleaded gasoline futures offers a further confirmation. Gasoline peaked last July at $2.90. The December low was $2.00 in synch with crude oil. But price action in gasoline is far stronger than crude. A big gap occurred in early February launching prices from $2.20 to $2.45. It has already hit $2.65 and has pulled back a smidge. This bodes well for the Permian Basin, not so much for the Bidenomics story. If my analysis is correct, everyone will notice come summer driving season in late May, a mere 90 days away.
Apache has lost one-third of its value since September. It is bouncing off a couple of lows at $30 now trading at $31.55. It features a low price earnings ratio of 6 while making $5 a share and paying a 3.2% dividend. APA’s acquisition of Callon Petroleum added 120,000 acres in Permian’s Delaware Basin. Daily output is now 500,000 barrels. No doubt this all-stock transaction has weighed down the price but the total enterprise value is now $21 billion. Why not buy our own backyard?
The DJIA fell about 900 points earlier this week. All but 150 points has been recovered, but transports fell 500 points and have yet to recover. The big gap from Tuesday’s drop is still on the chart. The tech heavy NASD 100 which has been driving the market has filled its gap but is short of the previous high. Various measures of the percent of stocks over moving averages is still very strong. Mood appears strong and we are in the season of an October low and a rally past tax day. I think the overall market will hold up a while longer.
Bond prices measured by the TLT ETF appear to be bottoming but that is unconfirmed so far. Bond prices have followed oil giving us another reason to think yields will fall. But then gasoline prices are rising. Gee if this was easy none of us would need a day job.
