Last week (ended March 17, 2017), crude oil (USO) and natural gas (UNG) producer Marathon Oil (MRO) saw its stock price underperform crude oil prices by a wide margin. The stock fell from $16.16 to $15.46, whereas crude oil prices rose from $48.49 per barrel to $49.31 per barrel during the same period.
Marathon Oil’s stock price is now finding support from its 50-week moving average, which stands at $15.13. Last week, MRO’s stock price bounced from its 50-week moving average and formed what is referred to as a reversal candle. This makes the second weekly reverse candle in a row formed by MRO’s stock price by taking support from its 50-week moving average.
In 2016, MRO stock rose ~40%, whereas so far in 2017, MRO stock has fallen ~10%. MRO’s stock hit its 52-week low of $9.52 on March 21, 2016, whereas it hit its 52-week high of $19.22 on December 12, 2016.
Peers and the medium term
By comparison, MRO peers Devon Energy (DVN) and Occidental Petroleum (OXY) have risen ~0.85% and ~2.38%, respectively, in the past week. Oil and gas exploration and production companies (XOP) outperformed the S&P 500 (SPY) last week.
After rising 56% between the beginning of November 2016 and mid-December 2016, MRO now appears to be consolidating its gains, trading below its 50-day and 200-day moving averages. On March 17, 2017, MRO’s stock price closed at $15.46, while its 50-day and 200-day moving averages stand at $16.55 and $15.53, respectively.
Remember, the 200-day moving average often acts as a strong support level for a stock price. On March 8, MRO breached its 200-day moving average, but the news on the OSM divestiture and the Permian acquisition helped it recover.
Now let’s analyze the possible trading range for MRO stock for this week (ended March 24) based on implied volatility.