In recent times the energy sector as a whole has been under pressure. This has largely been due to the fact that oil stocks such as the heavy weights of BP and Shell etc have been trading lower however, what we all really want to know is where there are key support areas from where recovery may begin from or at worst where if broken through further weakness is likely.
As we have reported within these columns before BP has been under severe pressure seemingly due to the current oil crisis as has the likes of Shell and other lesser influential oil stocks. Both BP and Shell have fallen over 100p since their recent highs around the middle to end of October.
However, what we really want to look out for is an area of support for not only BP and Shell but also other shares such as Cairn Energy and Enterprise Oil etc. As regards BP there is a first line of support at 487p with the absolute support level just above 475p. Looking for a low risk high reward entry would be to only purchase BP as close to 490p as possible.
As regards Shell, it is presently sitting on support. A close below the low of Friday at 449p would indicate this stock falling close to 400p area. On the other hand a close above Fridays high of 457p could give one an aggressive buy signal with a protective stop at 450p.
Two lesser-known stocks namely Cairn Energy and Enterprise oil, which are earmarked as strong holds by many analysts have also been falling of late but more importantly support may be just around the corner. As regards Enterprise oil there is a key support area at 415p.A break to the downside below here would indicate this stock going much lower, probably close to the 300p level.
However, if this support were to hold then the probabilities of a rally would appear to be good. Cairn energy has a good strong looking support area around the 230p area and I believe a low risk buy trade would be to wait until this stocks trades a little closer to this support area.
When analysing these four energy sector stocks it is plain to see why the sector has been in a downward spiral however, as each of these stocks are close to key support levels, that providing they hold better times could only be around the corner.
A further point I would like to make and that is the fact that some of the top analysts have been indicating each of the four stocks above are either “buys” or “strong holds”. However, each of these stocks have fallen considerably over this past few months trading and therefore investors buying these stocks based on these analysts consensus would be very disappointed at this time. On the other hand those whom wanted to take their own trading decisions based on technical analysis would have realised that the time to buy was not correct and would only now be looking out for possible buy signals close to the support levels mentioned above.
Looking @ share recent share price a short down to cc 400 may be on the cards.
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