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Downstream Companies: Moving Averages and Analysts’ Estimates

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Jan. 19 2016, Updated 7:58 a.m. ET

Moving averages

As of January 15, 2016, refining companies Delek US Holdings (DK) and Alon USA Energy (ALJ) were trading 31% and 27.5%, respectively, below their 100-day moving averages. Delek has been in a continuous downtrend since July 2015 after it hit its 2015 highs. The stock formed a double top pattern in July and fell since then.

In the past six months, Delek’s stock struggled to cross its 100-day moving average. On the other hand, Alon moved in a narrow range of $16–$18 since October 2015. After the Fed’s decision to hike the federal funds interest rate in mid-December 2015, Alon’s stock started to fall to $12, where it stood as of January 15. HollyFrontier (HFC) is also trading below its 100-day moving average.

Meanwhile, Phillips 66 (PSX) and Marathon Petroleum (MPC) were trading 6% and 17.5% below their respective 100-day moving averages as of January 15. Also, Valero Energy (VLO) and Tesoro (TSO) were trading at par and 11% below, respectively, their 100-day moving averages.

In comparison, the Energy Select Sector SPDR Fund (XLE) was trading 15.33% below its 100-day moving average. The above table shows these downstream companies’ moving averages and forward target prices.

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Wall Street analysts’ consensus estimates

Wall Street analysts’ consensus estimates suggest that the ten major large-cap refiners might return 37.4% on average over the next 12 months. Frontline refineries Phillips 66, Valero Energy, Marathon Petroleum, and Tesoro could rise by 24%, 22%, 60%, and 34%, respectively, from their current levels.

In comparison, Delek, Alon, and CVR Refining could rise by 78%, 44%, and 25%, respectively, from their current levels. In terms of the current and forward PE (price-to-earnings) ratios, Delek, CVR Refining, and HollyFrontier are relatively cheaper than other downstream companies.

In the next part of this series, we’ll analyze midstream companies’ moving averages.

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