Bottoms after long declines are typically a long repair process instead of a quick turnaround. It can take a number of quarters for a company to straighten out its affairs, or for the macro issues that overwhelmed the firm to change direction.
Marathon Oil (MRO) has had a punishing decline the past one and one-half years, to under $8 from over $40/share. Its shares fell in after-hours trading after it announced it would issue fresh equity in a bid to strengthen its balance sheet.
As Carleton English points out, it isn't the first energy company to raise fresh capital this year. Jim Collins says the company's choice of equity over debt is a wise one, with positive consequences over the long term.
At any point in time, a chart can be bullish or bearish, or partially bullish and partially bearish. At this point in time, MRO is still below its declining 50-day and 200-day moving average (see the chart below). The On-Balance-Volume (OBV) line may be bottoming, but it is early to make strong statements about its direction.
We can, however, point out a bullish divergence between the lower lows in price in January and February and the higher lows from the momentum indicator. This bullish divergence, aka a slowing in the rate of decline, can foreshadow firmer prices ahead.
In this longer-term chart, above, of MRO we can clearly see prices are well below the declining 40-week moving average line. The volume of trading has been heavy in recent weeks, and that can, at times, signal that aggressive selling is meeting equally aggressive buying, with the result being prices going sideways.
The OBV line on this weekly time frame is weak. Similar to the bullish divergence on the daily chart, we can find one on this weekly chart. We have a price low in September 2015 and a lower low in January 2016. The momentum study in the bottom panel shows equal lows -- which is a divergence. Higher lows would have been more bullish, but we learn to accept what the market gives us.
Is it time to run out and go long MRO? Probably not, as the technical outlook is not yet compelling. Should we keep MRO on our market monitor screen? Yes, and by the end of the second quarter we may a decent looking base in place.