It looks as if many of the quality energy stocks have now dip down to attractive buy ranges according to their relative strength. I am normally early in my initial entry prices, but since I advocate dollar cost averaging, building a position is less stressful than buying an entire position with one trade. Here is the definition of the Relative Strength Index or RSI:
"The RSI compares the magnitude of a stock's recent gains to the magnitude of its recent losses and turns that information into a number that ranges from 0 to 100. It takes a single parameter, the number of time periods to use in the calculation- Source StockCharts.com
Many investors use the Relative Strength readings on a stock to judge where to buy and sell a stock. As a basic rule of thumb, when a stock reaches a RS level of 40 or below, investors buy. When a stocks RS reaches 70-80, investors like to sell.
Today, the RS readings on many quality energy stocks once again dipped below a RS reading of 40. Here are a few I pulled up today:
Marathon (MRO) RS= 38
Valero (VLO) RS= 32
Chesapeake (CHK) RS= 34
Sunoco (SUN) RS= 27
Conoco (COP) RS= 33
Exxon (XOM) RS= 43
I like to use barchart.com to pull up the RS on a company. You might want to use it yourself. Here's how it works.
On the main page in the upper left hand side of the page, put in the symbol of the stock you want to look up, then click "go".
1) Under the "technicals" menu, click on "Charts".
2) Under the chart that appears there are 5 types of charts to choose from. Click on "Custom Chart".
3) In the drop down box that says "Secondary Study", scroll down to "Relative Strength-14" and click on it.
4) In the drop down box that says "Secondary Overlay", scroll down to "Relative Strength bar" and click on that also.
5) Once you do this, click on "Draw Chart".
You'll see to charts. The chart below, drawn in green, is your RS reading on the stock.
THE MARKET
The overall market looks very tired and heavy at these levels. The snapback rally that we saw this week is probably just that, a snap back.
A lot of the rally that we saw was due to the pullback in energy and commodity prices. Whats become clear however, is the selling in energy has been dramatic, and overdone, and the rally in the Dow is tired and weary. I would not be surprised to see th rolls reverse themselves starting next week.
For the day:
S&P 500 1266.99 +3.21 +0.25%
DJIA 10919.05 +35.70+0.33%
Nasdaq Comp 2261.88 +6.01+0.27%
Russell 2000 717.13 -1.03 -0.14%
NYSE Comp 7980.01 -0.16 +0.00%
CRB Index 331.60 -5.36 -1.59%
Dollar Index 90.62 +0.33 +0.37%
Financials
30-Year T-Bond 4.643% -0.038%
10-Year T-Note 4.541% -0.054%
5-Year T-Note 4.541% -0.010%
2-Year Note 4.651% +0.026%
