by Abigail Stevenson
Once again, crude’s pattern of the last few weeks played out on Tuesday, with the averages crushed and the price of oil plummeting down to a six-year low. And while Monday saw some major rallies in the oil-and-gas complex, most of those gains were wiped away Tuesday.
“When you’re dealing with a group of stocks that have been absolutely eviscerated, the last thing you want to be is emotional,” the “Mad Money” host said.
That is why Cramer turned to the charts to find out where the future of large energy players is headed. He spoke with Bob Lang, a technician and founder of ExplosiveOptions.net, as well as Cramer’s colleague at RealMoney.com. Lang took a close look at the beaten down energy group, particularly with the big dogs like Exxon Mobil, Chevron, EOG Resources and Occidental Petroleum.
The first thing to note is that all of these stocks are currently trading much lower than where they were the last time crude tested the $43 level in March. However Lang thinks that while crude is getting crushed right now, the technicals actually paint a brighter picture than you would expect.
This is because Lang believes that oil does not have much more of a downside left. Lately, the price of crude has hit levels that have not been seen since the Great Recession in 2009. In fact, the charts indicate that it is currently at insanely overbought levels, which suggest that oil is due for a bounce.
With this in mind, what about stocks of the oil companies themselves?
Lang started with Exxon Mobil, as it is the most conservative oil-and-gas company in the world. At first glance, the daily chart looked very ugly. However, in the past week the stock has been trading sideways at its long-term floor of support. He also noted that Exxon remains oversold and could be ready for a rebound.
“Oh, and let’s not forget, this is a company with a triple-A credit rating and a 3.8 percent dividend yield, not to mention the fact that Exxon’s other businesses, like chemicals and refining, are doing just fine, so it’s not totally hostage to the price of crude,” Cramer said.
Next up was Chevron, which was actually priced at $100 the last time oil was at these same levels, hovering around $43 a barrel. On Tuesday, the stock closed at $87, and the relative strength index showed that it is extremely oversold. That also suggested to Lang that the stock is due for a bounce.
Lang then turned his attention to the independent shale-based oil producer that is closely linked to the price of crude, EOG Resources. When Lang looked at the daily chart, he couldn’t deny that it is definitely in a downtrend. However, the stock tested its floor of support of $74 on Tuesday morning and bounced to $77. Once again, Lang was bullish on EOG and wouldn’t be surprised to see it rebound to $80.
However, the company that is most connected to the price of oil is Occidental Petroleum. Lang noted that its daily chart is actually in better shape than most investors think. It has recently made both a higher low and a higher high, which technicians consider to be a positive sign.