Downstream Company Delek Trades below Moving Averages


Jan. 15 2016, Updated 8:48 a.m. ET

Moving averages

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.

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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.


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