As of January 13, 2016, refining companies Delek US Holdings (DK) and Alon USA Energy (ALJ) were trading 27% and 26%, 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.
For the past six months, Delek’s stock has 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 Federal Reserve’s decision to hike the federal funds interest rate in mid-December 2015, Alon’s stock began its descent to $13, where it stood as of January 13. HollyFrontier (HFC) is also trading below its 100-day moving average.
Meanwhile, Phillips 66 (PSX) and Marathon Petroleum (MPC) were trading 9.4% and 16% below their respective 100-day moving averages as of January 13. Also, Valero Energy (VLO) and Tesoro (TSO) were trading 1.3% and 11.3%, respectively, below their 100-day moving averages.
By comparison, the Energy Select Sector SPDR Fund (XLE) was trading 16.6% below its 100-day moving average. The above table shows these downstream companies’ moving averages and forward target prices.
Wall Street analyst consensus estimates
Wall Street consensus analyst estimates suggest that the ten major large-cap refiners might return 40% on average over the next 12 months. Frontline refineries Phillips 66, Valero Energy, Marathon Petroleum, and Tesoro could rise by 30%, 24%, 62%, and 35%, respectively, from their current levels.
By comparison, Delek, Alon, and CVR Refining could rise by 83%, 48%, and 22%, respectively, from current levels. In terms of 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 the moving averages of midstream companies.