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3 Oil Stocks for Active Investors

Posted
3/21/2012 5:42:00 PM
By: Trading Markets
Referenced Stocks:BP;CVX;IXC;VLO;XLE

From the plunging price of natural gas to the controversy of over the XL pipeline to tensions with oil-producing Iran, the market for energy and energy stocks remains a place of potential opportunity for short-term traders and active investors who participate with a quantified, data-driven discipline.

As far as we're concerned, that quantified, data-driven discipline has at its core the time-tested concept of buying weakness and selling strength. And whether we are talking about the recent short-term pullback in stocks like Lions Gate Entertainment (read our article about Lions Gate below, or sell offs in oil and gas stocks like those in today's report, the plan for trading and investing profits remains the same.

To that end, let's take a look at a trio of energy stocks that have begun to trade at levels were buyers have tended to come off the sidelines, bidding shares higher.

Trading lower for two days in a row, and four out of the past six, shares of BP PLC ( BP ) have slipped to new, two-week lows ahead of trading on Thursday. The pullback in the stock marks BP's first close in technically oversold territory in almost two months. Then, a two-day pullback led to a two-day bounce in BP of more than 5%.

BP has a positive edge in the short-term of just under half a percent, and a neutral, 6 out of 10, rating.

Shares of Chevron Corp ( CVX ) have many of the same characteristics in common with BP. CVX has also pulled back for the past two consecutive sessions as part of a broader sell-off that has taken the stock lower for four out of the last six trading days. Also, Chevron has a positive edge of under half a percent and 6 out of 10 ratings. Like BP, Chevron likely will require additional selling before attracting significant buying enthusiasm. It took four oversold closes in a row in late January before buyers were coaxed off the sidelines and into the market during Chevron's last big correction. The stock then gained nearly 4% over the next four days.

Another stock that has experienced aggressive selling of late is Valero Energy ( VLO ). Shares of VLO had pulled back for three days in a row heading into Wednesday's trading and, in moving lower intraday, are headed for their second consecutive close in technically oversold territory since the stock climbed back above its 200-day moving average in the second half of January.

With a positive edge in the short-term of more than 1% and a "consider buying" rating of 9 out of 10 , Valero is not only one of the highest rated oil stocks in its group. Valero's 9 out of 10 ratings also makes the stock one of the highest rated in our database of thousands of stocks heading into trading on Thursday.

As always, traders looking to avoid single stock risk may want to consider any one of a number of oil stock exchange-traded funds that have also traded lower and become short-term oversold in bull market territory. These include the Energy Select Sector SPDRS ETF ( XLE ) and the iShares S&P Global Energy Sector Index Fund ETF ( IXC ). Both XLE and IXC have closed down two days in a row, are short-term oversold, and have positive edges of just above and just under 1%, respectively.

If you are looking for a way to identify stocks BEFORE they make their big move, then 7 Stocks You Need to Know is a great place to start. Click here to read "Lion's Gate, Hunger Games and 7 Stocks You Need to Know."

David Penn is Editor in Chief of TradingMarkets.com