Relative strength index suggests exploration and production firms may be oversold
The RSI (relative strength index) is a momentum indicator that helps determine when an asset is oversold or overbought. An asset is considered to be overbought when the RSI approaches 70. At this point, there’s a risk that you may see a pullback. Conversely, if the RSI approaches 30, the asset is probably oversold and could become undervalued, causing an eventual upward revision in its price.
As evident in the table above, several exploration and production firms within the Energy Select Sector SPDR Fund (XLE) have RSI values of less than 30, implying that they are possibly oversold. Among exploration and production firms, Cabot Oil & Gas (COG) and ConocoPhillips (COP) may be oversold. Among storage and transportation firms, Kinder Morgan (KMI) may be oversold. And in the coal and consumable fuels subsector, Consol Energy (CNX) may also fall into the oversold category. For its part, WTI (West Texas Intermediate) crude oil has an RSI value of 24.96, indicating that it’s also potentially oversold.
It’s possible that the prices of these firms may rebound in the short term if the market prices them appropriately.