Nothing fine about the oil refiners. Here’s your trade on VLO, TSO, PSX, WNR, and MPC. (January 08, 2016)
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We’re going to look at the refiners just because every once in a while I guess it’s good to look at something ugly, right? We’ll start with oil ( XOIL.X ); this is still desperately seeking a bottom. You look at the weekly chart, there have been a bunch of bottoms that have almost come to pass, but not really. Now we’re back here to the 2009 lows. But this was a massive steep sell-off for other reasons. You say, “Well this is pretty steep too.” That was back here. We get a bunch of little hiccups here, so this is not, in my view, this huge momentum driven thing like we got here until finally the “rubber band” was stretched SO far, because this had gone down SO fast that at some point you’ve just got to get some relief. Here, we’ve had a few hiccups that kind of let the “rubber band” stretch back and come back to the middle.
So I’m looking at this, and frankly, quite a while ago Dennis Gartman, who tends to change his views quite a bit, he had one call (at the time I was kind of laughing) when he said that oil was going to go to $10.00. He also said he thought it would go the way of whale oil. I’m not really sure how that’s going to come to pass, but he was looking at $10.00. I, seriously, have no idea whether he’s changed his mind on that and he’s not the “ax” on this, he doesn’t get to dictate where oil goes. But the point is, you’ve got to give credit where credit is due. He had a really good call there and he’s been right. And I believe he continues to be right. This shows really no sign of letting up. There are a lot of reasons for oil to be going down as much as it is; some “garden variety” supply and demand, others, geopolitical stuff. I’ll let you figure that out, I’m not going to go there.
I’ve had a few members ask about refiners, and so I thought, “Hey! Lets look at it for everybody here.” What you’re going to find is Valero ( NYSE:VLO ) is probably about the best of the bunch. On the weekly chart this looks pretty good. It’s been the antithesis of oil. Cheap oil, Valero ( NYSE:VLO ) makes more money on the refining, right? Because their costs of the good, which is oil, go down. So they’re working pretty well, but they are still about 6 percent above this 40-week, which is the 200-day moving average. I’m just going to go “bang” through these. Tesoro ( NYSE:TSO ) is also looking pretty good. These, again, are on the weekly chart. Phillips 66 ( NYSE:PSX ). No, so I’m eliminating that. Western Refining ( NYSE:WNR ). No, because this has been trending sideways forever, unlike Valero ( NYSE:VLO ) and Tesoro ( NYSE:TSO ) this has not been working. It’s not been NOT working until recently. So now, this isn’t working.
All of these things, even though a sector’s might be fine, it doesn’t mean all stocks in a sector are going to be working. Okay, Marathon ( NYSE:MPC ), also not working. They split 2-for-1 and the stock is below their pre-split level; that, in my view, is a yellow flag, not a red flag yet, a yellow flag. When this thing moves down below this low, then you’ve got your red flag. So on the weekly chart, the only stocks that I see are working, again, on the weekly chart, are Valero ( NYSE:VLO ) and Tesoro ( NYSE:TSO ). But I also see the 200-day or 40-week moving average as being relevant. Here’s the daily chart of Valero ( NYSE:VLO ); I wouldn’t want to buy this stock now. Based on the weekly chart, nice to own it, it’s working, it’s not “knocking your socks off”, it’s basically almost flat. In 2015, back here at this point, the high was 64.50, now it’s just a little bit higher than that. But the way a lot of stocks have been trading lately, shoot, I will take this.
So this has actually been working on the weekly chart. But if you’re looking for an entry you’ve got to wait, you’ve got to stay away from this. If the stock pulls back to 65.00, maybe 64.00, then you can take a more prudent entry. And always know where your stop is, because this could be the time that the stock falls to the 200-day moving average, and keeps going. So you want to wait, look for the bounce. Once you see the bounce put a stop down there, you’re good to go. How about the other one, Tesoro ( NYSE:TSO )? This is close to the 200-day moving average, very close, 3 or 4 points away. Fine. But this was a pretty big reversal on Friday. This looked like it was catching a little bit of a bid here and it’s not working now. Now, pretty much everything in the market is stinking, other than inverse ETF’s. So you are going to see even the strongest stocks kind of hiccup a little bit.
I would just say on this one, because of the volume, very, very high volume, and that really matters, you want to be careful about buying this stock. And frankly, you’ve got to be careful about owning it too; the weekly chart not withstanding. But this is actually easy, Tesoro ( NYSE:TSO ) and Valero ( NYSE:VLO ), the 200-day moving average is what really matters. As long as these two stocks remain above the 200-day moving average, then I think you can stay long. By the way, if one of the stocks starts falling below the 200-day moving average, watch out for the other one as well, because there would be a reason for that. So of all of these, Tesoro ( NYSE:TSO ) and Valero ( NYSE:VLO ) are working. They’re not at a good entry yet, they’re not at a point to sell yet either, but if they start falling below this 200-day moving average I think you get out and look for somewhere else to play.
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