Despite attention on green energy, oil-and-gas stocks such as EOG Resources NYSE: EOG
, Callon Petroleum NYSE: CPE
and Matador Resources NYSE: MTDR
all traded higher this week, and all found support at a key moving average.
Despite efforts to move away from fossil fuels, that won’t happen overnight. As global economies continue to recover, demand for fuel grows. While consumers typically associate energy with gas for their cars or for home heating, fossil fuels also power factories and other industrial output.
The S&P 500 energy sector, as tracked by the Energy Select Sector SPDR ETF NYSEARCA: XLE, is up 20.46% in the past three months and is eking out a gain of 0.77% so far this month.
These gains follow a dreadful year in 2020, when the sector ETF declined 32.51%.
Houston-based EOG Resources advanced 8.60% so far this week, reversing higher after declining last week. The stock bounced off its 10-week moving average and closed Wednesday at $93.05, up $1.29, or 1.41% in the session.
The stock cleared a cup-shaped base with a 29% correction on October 5, in heavier-than-average volume. The previous day, Ezra Yacob became CEO, replacing William Thomas, who retired. The change was announced in June. Thomas, who served as CEO since 2014, remains as non-executive chairman of the board as part of the succession plan.
EOG’s earnings and revenue growth bounced back in recent quarters following last year’s declines. According to MarketBeat data, analysts have a “buy” rating on the stock with a price target of $103.43, representing an 11.15% upside.
Since the company’s earnings report earlier this month, a total of six analysts boosted their price targets and/or upgraded their ratings, with another reiterating its “buy” rating.
The much-smaller Callon Petroleum, with a market capitalization of $3.443 billion, showed very similar chart action to EOG. Callon, too, reversed higher after declining last week, also finding support above its 10-week average. Shares closed Wednesday at $61.66, up $3.48, or 5.96% for the session. The stock closed near the high of its trading range.
So far this week, Callon is up $9.22 or 17.58%.
This stock, too, recently broke out of a cup-shaped base that began in late June after Callon pulled back from a high of $60.51.
After clearing that base, the stock fell 19% below its buy point but remained above its 10-week moving average, which may have given investors enough confidence to hold the stock rather than bailing out. It’s currently back in a buy range, with the recent moving-average support being a signal that institutional investors remain onboard.
Callon grew revenue at double- or triple-digit rates in seven of the past eight quarters, with the sole exception being the quarter ended June 30, 2020. Earnings growth rebounded in the past three quarters after slowdowns last year. Analysts see earnings growing 215% this year, to $9.01 per share, although that’s against an easy year-over-year comparison.
Fellow mid-cap Matador Resources is following a similar pattern of clearing a cup base recently. The stock held up better than Callon, trading in a sideways pattern. It rallied to a high of $47.23 on October 27 before pulling back, but has remained above its 10-week average.
The stock advanced $0.63, or 1.44% Wednesday, closing at $44.47. On November 19, the stock pulled back to tag its 50-day moving average, finding support just at that line, before advancing in each of the next three sessions.
Moving-average support indicates that institutional investors, via both their algorithms and human asset managers, are monitoring the stock for a point to add shares at a slightly lower price. That’s a sign of confidence in the company’s future prospects.
MarketBeat data show that analysts have a “buy” rating on Matador, with a price target of $43.70, a 1.73% downside. That downside target isn’t necessarily something to panic about, as stocks often rally further before institutions take some profits off the table.
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