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Three Oil Stocks Are Either In Sell Range Or About To Be

Diamondback Energy (FANG), Matador Resources (MTDR), and Earthstone Energy (ESTE), all leaders among oil stocks, are struggling this week as the White House reverses its stance on the energy industry. These Sector Leaders are good examples of when to pay attention to MarketSmith charts.

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FANG has hit the 8% sell rule. MTDR looks to have failed the test of its 50-day moving average, while ESTE is holding above its buy range after losing one-quarter of its value from reaching a high of 22.25 on June 7.

After taking a swing at Exxon Mobil (XOM) last week, President Joe Biden sent a letter to seven major oil refiners on Wednesday. "There is no question Vladimir Putin is principally responsible for the intense financial pain the American people and their families are bearing," Biden wrote. "But at a time of war, refinery profit margins well above normal being passed directly onto Americans are unacceptable."

The president called on the companies to take immediate action to increase the supply of gasoline, diesel and other refined products. He said his administration was prepared to use its emergency authorities to increase capacity in the near-term, if necessary.

Biden Takes Swing At Oil Stocks

The oil industry fired back. And while the Biden administration may be fighting energy companies, the US. government is opening new drilling rights on federal land for the first time since Biden took office.

Midland, Texas-based Diamondback Energy plunged another 8% on Friday, falling further below its 50-day line on heavy volume and entering its sell range, according to MarketSmith chart analysis. It's now testing its 200-day moving average.

Higher oil prices have fed FANG stock's earnings surge, although oil prices have dipped this week to around $110 a barrel for crude. Profit soared 1,500%, 374%, 343% and 126% the past four quarters.

Analysts tracked by FactSet forecast Q2 earnings per share of $6.36 for Diamondback, up 165% from a year earlier. Sales are seen rising 64% to $2.39 billion. Analysts predict 2022 earnings will rise 116% to $24.32 a share on a 36% sales increase to $9.27 billion.

FANG shares a highest possible Composite Rating of 99 with many other stocks in the oil & gas U.S. exploration and production group, according to Stock Checkup. The group itself sits at a lofty No. 5 out of IBD's 197 industry groups.

An Earnings Per Share Rating of 94 is solid among oil stocks today. Its recent stock price action has resulted in a Relative Strength Rating of 97.

Matador, Earthstone Are In Danger

Matador is in the same position as Diamondback. MTDR shares dipped 8% Friday to below their 50-day line, a sell signal.

Matador maintains a perfect 99 Composite Rating and EPS Rating, and a 98 RS Rating.

Of the three companies, Earthstone is the only one that has not yet hit its sell range. ESTE is holding above its 50-day line, dipping 7% Friday in heavy volume. Investors should keep on this one to see if it falls below support at the 50-day line. It's in danger of triggering the round-trip sell rule.

Earthstone is one of the companies that could be in line to buy drilling rights to drill for shale oil.

Earthstone also scores a perfect 99 on both Composite Rating and RS Rating.

Follow Michael Molinski on Twitter @IMmolinski

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