A day after surging more than 5%, helping the United States Oil Fund (NYSEArca: USO) to its best one-day performance since February, West Texas Intermediate futures are higher by another 2% today.
With that, USO, which tracks front month WTI contracts, has surged 11.6% in just the past week, giving investors reason to believe that oil’s darkest days are behind it. Some of the most savagely repudiated equity-based energy exchange traded funds are notably participating in oil’s recent rally. For example, the Market Vectors Oil Service ETF (NYSEArca: OIH) is up 7.2% in the past week.
Few equity-based energy ETFs are as intimately tied to fluctuations in oil prices as are oil services funds. That much was on display in 2014 when as USO plunged 42.4%, OIH tumbled 23.5%. That slide prompted investors to yank more than $276 million from OIH. [Oil Services ETFs Become Laggards]
A technical look at OIH indicates the $1.2 billion ETF may have more upside to come as it works its way through the bottoming process.
OIH “is now backin the middle of its 2015 range, but the bottoming process since mid-December has a more constructive look. A little over two weeks ago the index retested January’s multi-week lows just above $31.50. After three straight sessions of tight action near this level, the OIH ramped up 3.3% on March 18,” writes Gary Morrow for the TheStreet.com.
OIH recently reclaimed its 20- and 50-day moving averages and now rests an average of 5.1% above those lines. However, the ETF has a long way to run to reclaim its 200-day line. Even with its recent pop, OIH needs to gain another 16.8% to get back to its 200-day moving average, a line the ETF has not closed above since September. [Hits Keep Coming for Oil Services ETFs]
“OIH is also well below overbought levels and has plenty of room to run. The first big challenge will be the multi-week highs of February just below $37. Once through this area, which may require a bit of back-and-fill trading first, the OIH could get a nice boost. I believe this run could result in a gap fill move up to the $41 area. This is the site of a massive breakdown gap left behind on Nov. 21,” adds Morrow.
OIH’s fortunes will continue to be dictated in large part by Schlumberger (NYSE: SLB), Halliburton (NYSE: HAL) and National Oilwell Varco (NYSE: NOV), the three largest oil services companies. Those stocks, which combine for over 37% of OIH’s weight, are up an average of 5.3% in the past month, roughly the same performance delivered by OIH over that period.
Market Vectors Oil Service ETF
