Energy Technicals Pair Trade: Buy Chevron And Exxon, Sell Ensco And Transocean

The best way to play uncertainty in the Energy sector could be pair trading, according to Oppenheimer technical analyst Ari Wald.

“Our top-down process stresses buying the best of the best and selling the worst of the worst, and we accordingly still recommend an Overweight position in US large-caps from a global equity allocation viewpoint,” Wald advises.
 

Although Oppenheimer still sees U.S. stocks as “the best house in a bad neighborhood,” not all U.S. sectors are created equal. The firm is bullish on the Technology and Consumer Staples sectors and names Financials and Energy as the worst two sectors.
 

Related Link: Why Are Oil Prices Tanking 2 Weeks Before Potential Global Production Freeze Agreement?
 

However, Wald does have varying outlooks for Energy subsectors, and recommends that investors buy Integrated Oil stocks and sell struggling Drilling stocks.

While Wald acknowledges that the Energy sector could be in the process of finding an absolute bottom for this downturn, it continues to underperform versus the S&P 500.

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Sticking to the theme of buying the best of the best, Oppenheimer recommends investors buy leading Integrated Oil stocks Chevron Corporation CVX and Exxon Mobil Corporation XOM. At the same time, the weakest names in the Energy Sector have been drillers, and Oppenheimer names ENSCO PLC ESV and Transocean LTD RIG as top potential pair trade candidates for Exxon and Chevron.

Disclosure: the author holds no position in the stocks mentioned.