Outperformance from MRO?
Last week (week ending April 21, 2017), crude oil (USO) and natural gas (UNG) producer Marathon Oil (MRO) saw its stock price underperform crude oil prices. Marathon Oil’s stock price fell from $15.91 to $15.16, whereas crude oil prices fell from $53.18 per barrel to $49.62 per barrel during the same period.
Key highlights of the week
MRO stock started the week on a positive note on Monday, April 17, but failed to produce positive results during the week. The stock experienced a heavy selling pressure on Wednesday, April 19, due to the steep decline in crude oil prices.
However, on Thursday and Friday of last week, MRO’s stock price showed excellent relative strength, remaining almost flat with a narrow trading range, despite the strong decline in crude.
MRO is now trading below its 50-day and 200-day moving averages. On April 21, 2017, MRO stock price closed at $15.16. Its 50-day and 200-day moving averages now stand at $15.81 and $15.72, respectively.
An oil-rich strategy
In 2017, Marathon Oil is concentrating more on oil-rich US resource plays like the Eagle Ford Shale, the Oklahoma Resource Basin, the Bakken, and its recently acquired assets in the Permian Basin. In March 2017, Marathon Oil executed a strategic portfolio shift wherein it sold its OSM (oil sands mining) assets in Canada to Royal Dutch Shell (RDS.A) (RDS.B) and Canadian Natural Resources (CNQ) and bought substantial acreage of ~91,000 acres in the Permian, especially in the North Delaware Basin.
Stock performance: MRO and peers
After a 56% rise from the start of November 2016 to mid-December 2016, MRO appears to be still consolidating its gains. On a monthly chart, MRO formed a reversal candle in March 2017, and there’s a possibility that this reversal candle could mark the end of ongoing consolidation in MRO’s stock price.
By comparison, peers Devon Energy (DVN) and Occidental Petroleum (OXY) fell ~2% and ~3%, respectively, last week. Oil and gas exploration and production companies (XOP) underperformed the S&P 500 ETF (SPY) last week. Notably, the SPDR S&P 500 ETF’s trust prospectus defines itself as a trust that “seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500 Index.”
Now let’s analyze the possible trading range for MRO stock for this week based on the stock’s implied volatility.