ConocoPhillips Stock Could Be Gearing Up for a 2017 Rally



Year-to-date performance

In the first six weeks of 2017, ConocoPhillips (COP) stock was flat, rising from $49.87 to $50.14. During that period, crude oil (USO) prices were also flat, rising marginally from $53.72 to $53.86.

COP’s peers Occidental Petroleum (OXY) and Murphy Oil (MUR) have fallen ~4.0% and ~8.0%, respectively, since the start of 2017. Pioneer Natural Resources (PXD) has risen ~8.0% during the same period.

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Consolidating gains

When we look at a longer time frame, it appears that COP stock is consolidating gains from the rally that began in the first week of August 2016 and peaked in the second week of December 2016. COP stock rose ~37.0% from $38.37 to $52.89 during that period.

The rally in COP stock can be attributed to the rise in crude oil prices. The rise came on the heels of OPEC’s (Organization of the Petroleum Exporting Countries) agreement to cut production by 1.2 million barrels per day and non-OPEC producers’ and Russia’s agreement to cut production by 0.60 million barrels per day. These production cuts have the potential to reduce the supply side excesses in world oil markets.

Crude oil prices have risen ~41.0% from a low of $39.19 to a high of $55.24 from August to December 2016. Crude oil seems to be consolidating gains since the start of the year.

If crude oil prices manage to break out from their recent trading range, ConocoPhillips stock may follow with another rally. The company’s production mix is more than 60.0% liquids.

COP’s moving averages

Currently, COP is trading above its 50-day and 200-day moving averages. On February 10, 2017, COP stock closed at $50.13. Its rising 50-day and 200-day moving averages were $50.01 and $44.30, respectively. Typically, a rising 50-day moving average above a rising 200-day moving average is considered a bullish scenario for a stock.

In the next part of this series, we’ll look at the possible trading range for COP stock this week based on its implied volatility.


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