Bottoms Up to the Colt $45-Drinkin’ Oil Services

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The weekly chart of the OIH, ETF for oil service firms, indicates that it is pressed up just below the all-important $45 level. Since tagging it in late-February, the OIH pulled back about 8% over the past few weeks. Here again, we have another area of the market that gave us a stealth price correction, despite bears claiming that the entire market is frothy. In correcting down to its weekly support trendline, the oil services saw an initial surge of buying after last Tuesday’s sharp sell-off, which is exactly what bulls are looking to see at a trendline, rather than leaning down against it for too long.

After losing $45 during last summer’s swoon, the OIH has subsequently bumped its head up against that level for the better part of six months, all the while making a series of higher lows since the October 2011 bottom. That scenario lends itself to tons of pent-up demand for OIH, as the buyers are growing more confiendet with each higher low. From periods of compression usually come periods of explosion. Here, the presumption is that the explosion by the oil services will be up and out. Also note that $45 was a huge level of resistance in late-2009/early-2010. So, you know this is an area that the market deems a very important area to watch.

I will be looking at individual oil service stock ideas over the rest of the weekend.

Here are the top ten holdings of the OIH:

Schlumberger Limited	SLB
Transocean Ltd	RIG
Halliburton Co	HAL
Baker Hughes Inc	BHI
Diamond Offshore Drilling Inc	DO
National Oilwell Varco Inc	NOV
Noble Corporation Baar	NE
Smith International Inc	SII
Cameron International Corp	CAM
Weatherford International Lt	WFT
Nabors Industries Ltd	NBR
Ensco Plc	ESV
Tidewater Inc	TDW
Rowan Companies Inc	RDC
Exterran Holdings Inc	EXH

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