A Peaceful Pullback? 3 Top Energy Names Coming Into Buying Range

Energy Stocks

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Bulls cheered, and stocks rallied sharply on Tuesday as the possibility of a negotiated settlement to the war in the Middle East seemed within reach. The war has hammered equity prices, driving the major indexes and most leading stocks below their respective 200-day moving averages.

Energy has been a top-performing sector, as supplies have tightened due to the conflict. The energy sector, represented below by the State Street Energy Select SPDR XLE -4.57% ▼ , has gained nearly 33% year-to-date.

Money is flowing out of energy stocks as hope for peace emerges, but as you can see on the above chart, the bullish trend remains intact. A deeper pullback for XLE to the $58-$59 area seems possible, and that would place the energy ETF on its bullish trendline (black dotted line). XLE bounced sharply off of that trendline on March 11.

If the war is truly ending, energy names have further to fall, but Middle East diplomacy is rarely simple. Based on past history, it seems unlikely that the road to peace will be free of obstacles. Because of this, the recent pullback in energy stocks could present a buying opportunity.

Here are three names in the energy sector that are coming into buying range:

EOG Resources

Shares of Texas-based EOG Resources EOG -4.03% ▼  have gained 34.7% year-to-date, making it slightly stronger than its sector. This stock closed at a 52-week high on Monday.

Despite this recent strength, EOG features a current yield of 2.8%.

Analysts are mixed on the stock, which has an average price target of $145 according to TipRanks. Bernstein’s Bob Brackett has the high number, with a $167 price objective for EOG.

Based on the chart, I’d look to buy EOG Resources near its trend line (black dotted line), in the $138-$140 area. If the stock falls below its 52-week moving average (blue), I’ll head for the exit.

GRADE: B+

ConocoPhillips

ConocoPhillips COP -4.06% ▼  is on a similar trajectory as EOG Resources. Like EOG, COP recently reached a 52-week high. This stock is up by 36.5% year-to-date.

In this case, a deeper pullback will be required in order to reach our entry point of $122. COP has a dividend yield of 2.45%.

GRADE: B+

Phillips 66

Phillips 66 PSX -4.71% ▼  reached a 52-week high last week and has gained nearly 40% year-to-date. In this case, a pullback to the $170 area would be appealing for buyers.

Phillips 66’s trend line and 50-day moving average (blue) provide support for this stock, which has a current yield of 2.79%.

GRADE: B+

Bottom Line

It might seem counterintuitive to buy energy stocks right now, but this is a case of turning off the news, which has been whipsawing investors for weeks, and focusing on the charts.

These are strong stocks within a strong sector, pulling back from their highs. While peace negotiations can be difficult to parse, the charts in this case are not ambiguous.

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This article is being shared as premium content from TheStreet Pro. It was written by Ed Ponsi

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