The time to invest in oil stocks has come and gone, Jim Cramer again told viewers of "Mad Money" on Monday. A few weeks ago, Cramer declared the oil stocks "un-investable" because younger money managers were increasingly choosing not to invest in fossil fuels. The market this week received a new reason to sell oil stocks thanks to a price war between Saudi Arabia and Russia, which sent shockwaves through the oil market with crude oil prices plunging 24%.
Cramer called the Saudi decision to flood the world with supplies just plain stupid, as lower oil prices could destabilize both Iran and Venezuela and will do nothing to discourage U.S. oil producers. That's not to say that there won't be losers in the oil patch, however.
Cramer called out Occidental Petroleum Corp. (OXY) as particularly at risk.
Let's check out a few charts of the oil giant.
In this daily bar chart of OXY, below, we can see that prices have been under consistent and heavy selling pressure the past 12 months. OXY is below the declining 50-day moving average line as well as the declining 200-day moving average line. The daily On-Balance-Volume (OBV) line has been in a long decline and tells us that sellers of OXY have been more aggressive for months now -- a sign of liquidation (selling). The Moving Average Convergence Divergence (MACD) oscillator has been bearish the past 12 months except for a brief respite in January.
In this first weekly bar chart of OXY, below, we can see that the downtrend in OXY has been underway since early 2018, telling us this is an established downtrend. Prices are below the declining 40-week moving average line and rallies to the underside of the average line have failed. The weekly OBV line has been declining since early 2019 and the MACD oscillator on this longer time frame has been bearish since late 2018.
In this long-term weekly bar chart of OXY, below, we used all the available price data on www.bighcarts.com. Prices are headed back to the long 20-year price base around $10. Notice the large top pattern above $60?
In this Point and Figure chart of OXY, below, we used weekly close-only data to construct the X's and O's. Here the software is projecting a price target of $0 -- yes, zero. I doubt if OXY is going Chapter 11, but this is not looking optimistic.
Bottom line strategy: There are long-term trends influencing the price of energy and it does not pay to ignore or fight them.
