9 oil-refining stocks to watch

The sector is overvalued after a strong bull run and traders will have to refine their strategy accordingly.

By TheStreet Staff Jun 11, 2013 1:22PM

thestreet logoNatural gas plant copyright Kevin Burke, CorbisBy Richard Suttmeier

 

The oils-energy sector ended last week 7.4% overvalued with the refining and marketing industry 14.6% overvalued. There are 558 stocks in the sector and only 14 are rated "buy," according to ValuEngine. With 138 rated "sell" and another 45 rated "strong sell," the sector is rated "underweight" with 32.8% of all stocks in the sector rated "sell."

 

The nine refiners I am profiling today performed tremendously over the last 12 months, with gains between 49.4% and 164.1%, which makes it difficult to sustain these gains for another 12 months even though they have 12 month trailing price-to-earnings ratios in single-digit territory between 5.4 and 9.5. Eight of nine stocks are above their 200-day simple moving averages which represents the risk of a reversion to the mean. In my opinion these energy stocks qualify for my buy-and-trade strategy. Be aware that there are some negative divergences in the weekly chart profiles.

table
Reading the Table

OV/UN Valued: Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage, according to ValuEngine.

VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy.

Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.

Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.

Value Level: Price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual. 

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.

Risky Level: Price at which to enter a GTC limit order to sell on strength.

 

Alon USA Energy (ALJ) ($17.43) needs to have a weekly close above its five-week modified moving average (MMA) at $17.55 to have a positive weekly chart profile. It will be important to hold its weekly value level at $17.24 to rebound to its monthly risky level at $21.15.

 

CVR Energy (CVI) ($57.60) peaked at $72.32 on May 28 and its weekly chart profile shifts to negative on a weekly close below its five-week MMA at $58.69. My quarterly value level is $44.97 with a weekly risky level at $64.46.

 

Delek US Holdings (DK) ($34.75) peaked at $41.47 on March 11 and the stock's weekly chart profile stays negative given at weekly close below its five-week MMA at $35.70. My quarterly value level is $31.15 with a weekly pivot at $35.43 and a monthly risky level at $40.35.

 

HollyFrontier (HFC) ($46.34) peaked at $59.20 on March 5 and the stock's weekly chart profile stays negative given at weekly close below its five-week MMA at $48.55. The 200-day SMA is $46.38 with a weekly risky level at $50.60. 

 

Marathon Petroleum (MPC) ($82.41) peaked at $92.73 on March 25 and the stock's weekly chart profile shifts to positive given at weekly close above its five-week MMA at $81.95. My weekly value level is $78.88 with a monthly risky level at $93.75.

 

Phillips 66 (PSX) ($65.11) peaked at $70.52 on March 28 and the stock's weekly chart profile stays positive given at weekly close above its five-week MMA at $64.46. My weekly value level is $63.85 with a monthly risky level at $73.68.

 

Tesoro (TSO) ($58.09) peaked at $65.75 on May 20 and the stock's weekly chart profile shifts to negative on a weekly close below its five-week MMA at $57.96. This stock was downgraded to hold from buy as June began. My annual value level is $56.45 with a weekly pivot at $60.68 and monthly risky level at $61.26. 

 

Valero Energy (VLO) ($38.97) peaked at $44.72 on March 5 and the stock's weekly chart needs to have a weekly close above its five-week MMA at $39.35 to stay positive. The stock was downgraded to hold from buy as June began. My weekly value level is $37.97 with a monthly risky level at $46.51.

 

Western Refining (WNR) ($31.25) peaked at $39.42 on March 6 and the stock's weekly chart needs to have a weekly close above its five-week MMA at $31.94 to shift to positive. My quarterly value level is $29.74 with a weekly pivot at $31.56 and monthly risky level at $37.08.

 

At the time of publication the author held no positions in any of the stocks mentioned.

 

 

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