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The Oil Sector Opportunity That Can’t Be Ignored

Rig

If you’ll forgive the pun, oilfield service stocks are a well to which I have returned a couple of times this year, and with results that have so far been well short of spectacular. Still, based on some recent data and the fact that there are signs of life in the moribund industry, I am quite prepared to admit that and go there again.

As a young man in a London dealing room, I was taught early that long-term success in financial markets was in large part about understanding and controlling your emotions. There are, I was told, two main ways to do that. You must avoid being tempted into bad decisions by the euphoria and despair that often come from running a position by setting parameters for every trade and, more importantly, sticking to them. Secondly, you have to forget what happened the last time you tried a similar trade, good or bad, and assess each situation based on available data and market dynamics.

The first of those rules means that even though I have seen a possible revival in oilfield service stocks too early on a couple of occasions, stop loss orders have kept losses to manageable levels. The second means that despite that experience I cannot ignore the possibilities that now present themselves.

(Click to enlarge)

(Click to enlarge)

As you can see, the stock in the industry’s two main players, Haliburton (HAL) and Schlumberger (SLB) have followed similar paths over the last year. At the beginning of 2018,…

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