3 oil stocks on watch as lockdowns reduce demand
- Intelligently trade lower demand for oil stocks related to blockages in a fluid market.
- Shell (SHEL) surpasses its fossil fuel heritage and resistance to major charts.
- Chevron (CLC) protracted and overbought CVX equity rally running on steam.
- TotalEnergies (TTE) shows recent earnings, an attractive dividend and technical data.
At the start of the pandemic, life as most Americans knew it changed dramatically. It was the “new normal”. Amid stay-at-home orders, travel restrictions and forced business closures, energy prices and oil stocks were punished to decade lows and worse. And that made sense. The slowdown in demand was happening globally.
Today, the “new normal” has long been in the rearview mirror in the United States. But overseas in China, particularly in Shanghai, the government has imposed lockdown orders over the past two months amid rising Covid-19 cases that have grabbed headlines.
Life is not a vacuum though, and we are not in 2020 with demand for oil stocks disappearing overnight. Not only are global markets much better prepared for the next outbreak, but other boogeyman like the war in Ukraine and the Russian embargo can (and have) come to disrupt supply and demand dynamics.
So given the reality that lockdowns will reduce demand, but other factors and catalysts can arguably trigger even higher energy prices and a stronger operating environment for oil stocks or, conversely, help a slump, let’s take a smart look at three oil stocks to trade using the price chart. supply and demand factors to guide the decision.
|SHEL||Shell (formerly Royal Dutch Shell)||$56.88|
Shell (NYSE:SHEL), formerly known as Royal Dutch Shell, is the first of our oil stocks to trade. And this energy giant is a name to trade long with a purchase of SHEL stock.
Unlike many of its fossil fuel competitors, this integrated oil stock is working a little harder for long-term sustainability as energy trends shift to renewables and while Shell is in a cash-favorable position in because of today’s energy prices through the roof.
Shell insists it can go to net zero by 2050. But the pivot has come at the expense of income investors, as the oil stock slashed its dividend in 2020 and played a definite role in the weaker performance of SHEL stock compared to many of its peers over the past two years. .
Still, the growing solar and wind assets of this oil stock, which dominates the supermajors, should be profitable in the long term for investors. And today, the monthly price chart for SHEL shares reveals a decent place to buy.
Technically, Shell shares have consolidated either side of the stock’s midline, along with Fibonacci resistance and the two-step pattern. Against earnings, this oil stock looks ripe for a period of bullish momentum beyond resistance at new highs and channel resistance over the next few months.
Chevron (NYSE:CLC) is the next of our oil stocks to trade more wisely. And unlike SHEL, the observation is that CVX stock is either selling or shorting.
If you’re of the view that today’s lockdowns will be something more in line with Covid-19 energy demand around 2020, a short in CVX makes sense. Shares traded as low as $46.46 amid end-of-day warnings for oil at the start of the pandemic. And that’s a far cry from the current $165 market price of this oil stock.
Alternatively, if you think there is more greenwashing than actual greening. Or a corporate backlog related to renewables, which would ultimately be bad for longer-term business, so consider that just another reason to sell that oil stock now or go short.
Finally, and given that all high octane stock performance is burning out, today’s price chart of this oil stock warns that an extremely bullish run over the past few months is more likely to suffer a larger fix.
The observation is that a bearish cycle could take action as low as $110-$125 and challenge the 38%-50% Covid-19 retracement zone and CVX trendline support. Put this oil stock on watch for sell or short sell today if CVX shares confirm April’s bearish inner doji candlestick to avoid or take advantage of anticipated weakness.
TotalEnergies SE (TTE)
TotalEnergies SE (NYSE:TTE) is the last of our oil stocks to trade. And after a beating in earnings last week, a buy in TTE shares is a more timely recommendation than raising concerns about how lockdowns could weigh on oil inventories and energy demand.
Zacks Stock Research reports that the France-based supermajor earned $3.40 per share in the first quarter, which beat its consensus opinion by 21.9%. At the same time, revenues jumped almost 57% compared to the same period last year.
Rising energy prices obviously benefited the bottom line of this oil stock and its broader fundamentals. But like Shell, TTE is offering more than lip service as it plans to switch to cleaner renewables.
Notably, this year the outfit purchased some assets from Sun Power (NASDAQ:SPWR) to expand its presence in the United States and develop more than 100 megawatts of additional renewable energy capacity.
Technically, TTE offers today’s investors a rarer, well-constructed opportunity to buy stocks smartly with the added teaser of a 6% dividend. This oil stock just confirmed the completion of a three-month pullback within a decade-old, lighter uptrend channel.
With stochastics well neutralized and flattening, a breakout of the longer consolidation pattern and fresh highs, as well as a period of outperformance, are expected to play out in the second half of this year.
As of the date of publication, Chris Tyler had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.