When I started my Quantum Edge Pro service last September, one of my first recommendations was an energy stock.
Stocks had been headed down all year long, with one big exception. That’s why I dubbed energy as the “savior sector of the stock market for most of 2022.”
Profits were already rolling in and oil prices were high even before Russia invaded Ukraine – but especially after that cataclysmic event on Feb. 24, 2022. Russia become a global pariah, and as the third-largest producer of oil worldwide, that meant disruptions.
Uncertainty and the threat of global shortages ignited a 76% surge in oil prices in a mere six months – a stretch that ran from the end of November 2021 to the end of May 2022.
We all remember the exorbitant prices we had to pay at the gas pump. And we felt the inflationary squeeze that created – and how those higher fuel costs crimped economic growth. But oil companies were making money left and right.
Then… thud. Prices fell nearly as fast as they went up. By this March, they had dropped 42% and were back where the liftoff had started 16 months earlier.
Well, guess what? Now the trend’s flipped again.
Oil prices surged 16% in July in their biggest move since Jan. 2022, which was right in the middle of last boom.
Related stocks are on the move, too. But not necessarily the ones that come to mind first.
Moving Up the Ranks
There are a few reasons for oil “gushing” higher (sorry), and they all come back to supply and demand.
Saudi Arabia and Russia both cut production. The U.S. government is no longer releasing oil from its Strategic Petroleum Reserve. And at the same time, global demand is rising as the risk of a recession fades.
My Quantum Edge system rates sectors as well as stocks, and I’ve watched Energy make a big move up the ranks.
At the end of May, Energy ranked seventh out of my 11 sectors, with a low Quantum Score of 47.7. (As a reminder, that score is my overall ranking of a stock or sector based on fundamentals and technicals, which include Big Money inflows.)
One month ago, at the end of June, Energy moved up to fifth, and its Quantum Score had jumped to 56.6.
And today, Energy is the third-strongest sector, with an even higher Quantum Score of 62.4.
That’s not a blazing Quantum Score, but it’s a heck of a lot better than it was.
The Energy Selector Sector SPDR Fund ETF (XLE) rates slightly higher, with a Quantum Score of 58.6.
It’s clearly not time to go hog wild buying energy stocks… especially since the best opportunities are actually not the biggest oil giants.
ExxonMobil (XOM) comes in with a weak 48.3 Quantum Score. It’s flat for the month.
Chevron (CVX) is slightly better at 53.4.And it’s up slightly more – nearly 4% this month.
ConocoPhillips (COP) is the closest to what I would consider a “buy” – with its Quantum Score of 63.8. I prefer that score to be above 70 before I buy. Its fundamentals rate a solid 75 and are far and away the best of the Big Three. It’s worth keeping an eye on.
However, there are some that get my attention now – with scores high enough to interest me.
The Tech Edge
One of the top performers this month is Schlumberger (SLB), which jumped 19% here in July. That continued a run it started in June, resulting in a 36% surge in just two months.
Not bad for a company valued at $82 billion.
Schlumberger is the world’s largest oil services and equipment provider, but the company emphasizes innovation and technology – “technology that unlocks access to energy for the benefit of all.”
With a Quantum Score of 69, SLB is right on the edge of being a buy. Its Fundamental Score is a solid 70.9, and Technical Score has improved with the recent run to 67.7.
What’s more, Big Money is paying attention. My Quantum Edge system retrieves and analyzes proprietary signals on what Big Money is doing, down to the individual stock. And it picked up five buy signals in July alone, which are represented visually by the green bars in the chart below:
SLB is not a slam dunk. Neither are Energy stocks in general.
But SLB is one to consider given its latest run, Big Money inflows, and solid fundamentals. It hasn’t quite hit the zone of highest probability yet, but it’s close.
I do see better opportunities out there, but it’s nice to see Energy stocks showing some life. It means the global economy is hanging in there, and fears of a recession are shrinking.
It’s just more data that points to another Big Lift coming in the market.
Jason Bodner’s Power Trends
P.S. As I told some of my Quantum Edge readers earlier today, my data shows the market is now technically overbought after its latest run.
That’s actually good news for longer-term profits, but it does require caution in the short term with a pullback increasingly likely.
Our plan is to lock in some our profits soon and then grab the best stocks in the market at very attractive prices when they do pull back.
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