While I was cautiously optimistic on some oil stocks recently, many are starting to look vulnerable right here. The Oil Service HOLDRs (ETF) (Public, NYSE:OIH) which is a good proxy for Oil Service stocks is close to setting a lower low, which could lead to some near term weakness in the group. While there is some decent support underneath, some individual names are looking more vulnerable.
One name I will be watching is Weatherford International Ltd. (Public, NYSE:WFT). WFT has been trading in a base for the past few months, and set a clear resistance level by failing to hold the $23 area twice. It pulled back on higher volume after the second failure and subsequently broke support in late November. In fact, this breakdown is a classic double top, with the neckline in the low $17's. The emasured move would take WFT near $12 a share.
Currently, WFT is testing the broken support area as resistance, and could present a nice shorting opportunity if it rolls over from here.
A couple of other oil stocks that look pretty vulnerable are Schlumberger Limited (Public, NYSE:SLB) and BJ Services Company (Public, NYSE:BJS).
Good Trading,
Joey
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