For his Executive Decision segment of "Mad Money" Wednesday, Jim Cramer welcomed back Matt Gallagher, president and CEO of Parsley Energy Inc. (PE) , an oil and natural gas producer. Gallagher has been calling for statewide production cuts in Texas to stave off a coming wave of bankruptcies that could cripple domestic oil production.
Gallagher said oil demand has plunged by more than 30 million barrels a day. That level of disruption calls for everyone to chip in and do their part to curb production.
A healthy domestic oil industry is vital to national security, but Gallagher also noted that it supports more than 350,000 service jobs in Texas. The best place to store oil is in the ground, he said.
Let's check out the charts of PE.
In this daily bar chart of PE, below, we can see that prices were trying to stabilize from June. There was some buying interest whenever prices dipped into the $16-$14 area until the support disappeared in late February. Prices made a free fall to $4 and then volume swelled and prices bounced. The level of volume looks like it jumped to four to five times normal and that may have been enough capitulation to say we reached a low and possibly the start of a new base pattern. Prices are below the declining 50-day and 200-day moving average lines.
The daily On-Balance-Volume (OBV) line made a low in March but unfortunately made a lower low in April, telling us that the aggressive selling has not stopped. The 12-day price momentum study in the bottom panel of the chart shows a small bullish divergence. Momentum made a higher low when price made a lower low. This is a small pattern, so the implications are not real big.
In this weekly bar chart of PE, below, we can see that the stock price of PE has been in a long decline going back at least three years. Prices are below the declining 40-week moving average line. The weekly OBV line shows us three years of aggressive selling. The Moving Average Convergence Divergence (MACD) oscillator is in a long-term bearish pattern but has begun to narrow slightly, giving us some hope for the future.
In this daily Point and Figure chart of PE, below, we can see the long and rapid decline for PE's shares. Prices have reached a downside price target but the software is not yet detecting enough accumulation (buying) to generate an upside price target. More basing needs to be done to signal a turnaround.
Bottom line strategy: This is not technical analysis but, in my humble opinion, Texas or rather Texans are very independent people. Much of the wealth of the state was made by grit and hard work of individuals in commodities -- oil, cattle and cotton among them. I wish Matt Gallagher well in his efforts to get the industry as a whole to reduce output, but I don't think he will be successful and cutbacks will be forced on the industry by bankruptcies. Avoid the long side of PE.