The Market Vectors Oil Services ETF (NYSE:
) and the iShares Dow Jones U.S. Oil Equipment & Services
Index Fund (NYSE:
) are following the broader market higher today as traders and
investors do some value shopping following two days of
significant losses for stocks. However, just how much value can
be found with these
and their marquee constituents might be up for debate, at least
on a technical basis.
The daily charts of IEZ
look eerily similar, which is no surprise given the similarities
in their respective lineups. What that could ultimately mean for
investors is that not one, but two oil services are vulnerable to
more declines. All this despite the fact that
energy names are usually decent November
Looking at OIH, the larger of the two ETFs by assets, the
fund's post-QE3 peak was in the neighborhood of $43.50. Since the
Federal Reserve's announcement in mid-September, OIH has lost
more than $6. A $6 decline equals 13.7 percent meaning this
high-beta fund need only fall another 6.3 percent for a 20
percent decline and confirmation of a new bear market. Bearish
technicals already exist though as OIH gave up its 200-day moving
average last month.
As for IEZ, the song is close to the same. The $325.5 million
ETF is off 14.2 percent from its September peak and also fell
through its 200 day line last month.
It bears remembering that it is the demand for or selling
pressure on an equity-based ETF's underlying holdings that
determines the fund's price action and with IEZ and OIH, that
means investors need to pay attention to three stocks. That trio
is Schlumberger (NYSE:
), Halliburton (NYSE:
) and National Oilwell Varco (NYSE:
Both ETFs are guilty of the same offense and that is excessive
weights to that trio. In OIH, Schlumberger, National Oilwell
Varco and Halliburton represent about 39 percent of that ETF's
weight. IEZ is not much better as it devotes about 36 percent of
its weight to those stocks.
That is not good news, particularly regarding National Oilwell
Varco. The stock has tumbled $16 since peaking in September
around $85. Another $1 lost means the stock will be down 20
percent since September. Welcome to bear market territory.
Trading around $30.50 at this writing, Halliburton, the
world's second-largest provider of oilfield services behind
Schlumberger, is now off 17.5 percent since topping in September.
Schlumberger looks sturdy by comparison as the shares are off
less than 12 percent over the same time. That stock accounts for
20.6 percent of OIH and 19.4 percent of IEZ.
Given the dour technical outlook and the high-beta nature of
oil services names (IEZ's beta against the S&P 500 is 1.35),
these ETFs likely face more near-term downside. Patient investors
can wait for better pricing to avail itself with IEZ and OIH.
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