Stock Chart OIH

Posted by downtowntrader | 8/10/2009 11:13:00 PM View Comments

Stock Chart Analysis OIH
Oil Service HOLDRs (ETF) (Public, NYSE:OIH)

Typically oil and commodity type stocks are late cycle plays, and being that we are either in the middle of a bear market, or optimistically in an early bull, I haven't been too excited about any sort of trending move in the group. While, there has been opportunities on smaller time frames, I have been ignoring the sector as a possible group in a bottoming process, due to the my views on market cycles. However, maybe because of the weakness in the dollar, or because these stocks were beaten down so bad, some of the oil names are starting to show signs of a bottom. OIH, which is an Oil Service Stocks ETF, is also showing a potential bottom and has made it onto my watchlist. While I prefer to play the ProShares Ultra Oil & Gas (ETF) (Public, NYSE:DIG) for short term trades, I always prefer to chart non leveraged ETF for my primary analysis.

In looking at the OIH chart, it had been in a several month consolidation after dropping from a bull market high of near $229 a share to near $61 in a span of just 6 months. The $87 level rebuffed the first few breakout attempts and proved to by a significant price level. It finally cleared this level in April, and was able to follow through with a sharp move higher. It has since been in a consolidation and ended up testing the breakout area after pulling back in late June. It looks to have held this level and formed a higher low. This is significant, because the action is hinting at a bottom. OIH cleared a base and set a higher low. While the chance that this is a failed breakout exists, currently, the chart is still healthy. The key area to watch here is the small consolidation taking place between roughly $99 - $108. A move above will clear the descending trendline framing the current consolidation and a move below will probably lead to another retest of the breakout area. Either move may offer a good trade opportunity.

Good Trading,


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