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Sectors Shift; Oil Services Look Robust

David Becker
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Sectors Shift; Oil Services Look Robust

As investors exited momentum stocks, they have turned to oil services as a sector which might experience the next leg higher. Oil services are an area of the market that performs well when exploration and production companies are in search of drills to produce oil and gas.

The OIH (Market Vectors Oil Services ETF) is poised to break out as it approaches the November highs near $50. Components such as Baker Hughes and Halliburton have already broken out and will likely see continued interest as the market moves higher. The technical for the OIH are strong as momentum gains traction. The MACD (moving average convergence divergence) index has generated a buy signal which should give investors’ confidence in higher price action. The buy signal occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal.

The RSI (relative strength index) which is an oscillator that measures momentum by generating an index by comparing the current closing price to the prior 14-days of closing prices, is moving higher with price action which reflect accelerating positive momentum. The current print at 67 is on the upper end of the neutral range but below the overbought trigger level of 70.

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