Oil has been doing poorly lately, which has most energy stocks falling as well. OPEC recently agreed to continue its current production cap, but investors still aren’t having it. They were either looking for a larger cut in production (cutting down supply while maintaining demand to drive oil prices higher), or they believe the U.S. shale producers will continue to up their output. This would theoretically neutralize OPEC’s intention and drive oil prices lower.
However, it’s not in U.S. producers’ best interest do this. Instead, they need to steadily see demand increase. That, or take advantage of volatility in the market, agreeing to sell oil on big swings higher and curb production on declines.
Whatever the reasoning may be, the truth really comes down to price. WTI crude is down about 10.5% over the past two weeks and almost 20% from this year’s highs. That’s hurt energy stocks too, with the Energy Select Sector SPDR (ETF) (NYSEARCA:XLE) falling o.5% and more than 12% in the same time period, respectively.
So what about now? If oil prices stabilize and begin to move higher, it will boost a great number of energy equities. The bad news is, if oil continues lower, inevitably, oil stocks will go down too. But the good news is we’ve found seven solid risk-reward setups.
That is to say, we’ve found a handful of stocks that give investors a beefy reward should oil prices hold and rally. And if that doesn’t happen, these stocks are just above critical support zones and traders can cut-and-run with minimal damage. Many of these names are long-term investment worthy too, should oil prices fail to totally collapse. This gives long-term investors a way to play as well.
That’s a win-win for traders and investors alike. Let’s have a look at our seven energy stock buys.