The ceasefire continues, and oil prices are testing highs because of the supply disruptions.

To answer the question from last week, investors have committed to buy, at least in semiconductor stocks.  But I must ask myself why that’s the focus rather than oil companies that are positioned to benefit from higher prices?

But not all oil companies are the same.  Some oil companies are finding positive money flow.  Others are not.  Comparing the broad energy company ETF XLE to the oil services ETF OIH certainly illustrates the selective buying going on within the energies markets:

OIH is making new highs, and XLE is simply recovering from lows.  I could simply target a bullish trade in OIH to follow this momentum, or I could use the Stock Forecast Toolbox to identify which stocks are showing more positive investment flows than others.  One such oil company that’s showing particular strength is Halliburton (HAL):

HAL is making new highs and is certainly showing bullish momentum, and while OIH is overbought with a 72 RSI, HAL is not with an RSI at 65.  There appears to be more room to run for HAL as it breaks out to new 6-month highs, and the Forecast Toolbox certainly agrees:

With a projected move to over $46 in the next 2 weeks, I’m excited by the leveraged bullish opportunity here.  Implementing a simple call strategy allows for capturing a very high potential return, as the June 18th $41 calls are currently trading for $2.20, and would be worth over $5 on a move to $46 in the stock.  That’s the kind of leverage I love to see when looking for a long call position with a projected higher probability of continued bullish price action.

As the market continues to search for direction and determines which stocks are leading the momentum higher, be sure to take advantage of the free 7-Day Trial of the Stock Forecast Toolbox!

If you have any questions, never hesitate to reach out.

Keith Harwood

Keith@OptionHotline.com