Report
Dave Nicoski ...
  • Ross LaDuke
EUR 47.95 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Upgrading Energy To Overweight

There continues to be a dearth of bearish signals emanating from this market. As a result, we remain bullish and we continue to view any pullbacks as buying opportunities.
· S&P 500, Nasdaq 100. On the S&P 500 we see short-term support at 3750 (coinciding with the uptrend), with the next key support levels coming in at 3635, 3588, and 3550. As long as 3550 holds, we believe a bullish intermediate-term outlook is appropriate. As for the Nasdaq 100 (QQQ), $310 is short-term support (coinciding with the uptrend); if that fails to hold we will be watching for support at $303.50-$305 followed by $298.
· Sector Relative Strength Rankings & Weighting Recommendations. We are upgrading Energy to overweight; RS is breaking above the multi-year downtrend on the equal-weighted S&P 500 Energy Sector (RYE) and price is bullishly inflecting -- add exposure. Additionally, crude oil prices remain on a bullish trajectory. Not only are these developments positive for Energy, they are also positive signs for the broad equity market considering the cyclical nature of the Sector... see charts below and page 2.
· US Dollar; High Yield Spreads. The US dollar (DXY) remains in a well-defined downtrend dating back to March of last year; this remains an important factor in our overall bullish thesis. 91 is short-term resistance to watch on the DXY, while bigger resistance is at 92. High yield spreads remain on a steadily narrowing path. We view this as an important vote of confidence from the bond market, and it is a bullish sign for the broad equity market... see page 3.
· Breadth Remains Healthy. Breadth metrics remain healthy as measured by advance/decline (A/D) lines on major indexes such as the Russell 3000, S&P 500, and Nasdaq 100. With A/D lines on these indexes in uptrends and at/near new highs, it helps confirm the validity of the uptrends in the indexes themselves. Overall this supports our bullish outlook since bull markets are strongest when there is broad participation..
Underlyings
Abercrombie & Fitch Co. Class A

Abercrombie & Fitch, through its subsidiaries, is a retailer which primarily sells its products through its wholly-owned store and direct-to-consumer channels, as well as through various third-party wholesale, franchise and licensing arrangements. The company provides an assortment of apparel, personal care products and accessories for men, women and children under the Hollister, Abercrombie & Fitch and abercrombie kids brands. The company has operations in North America, Europe, Asia and the Middle East. The company's operating segments are brand-based: Hollister and Abercrombie, the latter of which includes the company's Abercrombie & Fitch and abercrombie kids brands.

American Eagle Outfitters Inc.

American Eagle Outfitters is a multi-brand retailer. The company operates retail stores and online at www.ae.com and www.aerie.com. The company provides a range of apparel and accessories for men and women under the American Eagle Outfitters brand, and intimates, apparel and personal care products for women under the Aerie brand. The company operates stores in the U.S., Canada, Mexico, Hong Kong, and China. The company also has license agreements with third-parties to operate American Eagle Outfitters and Aerie stores throughout Asia, Europe, India, Latin America and the Middle East. The company also operates two other brands, Tailgate, a vintage, sports-inspired apparel brand, and Todd Snyder New York, a menswear brand.

Antero Resources Corporation

Antero Resources is an oil and natural gas company engaged in the exploration, development and production of natural gas, natural gas liquids (NGLs), and oil properties. The company focuses on unconventional reservoirs, which can generally be characterized as fractured shale formations. The company's drilling operations are focused in the Marcellus Shale and Utica Shale of the Appalachian Basin. The company's industry segments are: the exploration, development, and production of natural gas, NGLs, and oil; marketing of excess firm transportation capacity; and the gathering and processing of natural gas. All of the company's operations are conducted in the United States.

APA Corp.

Apache is an independent energy company that explores for, develops, and produces natural gas, crude oil, and natural gas liquids. The company had exploration and production operations in United States, Egypt, and offshore United Kingdom in the North Sea. The company also has exploration interests in Suriname. The company markets its United States crude oil production to main oil companies, marketing, and transportation companies, and refiners based on a West Texas Intermediate price or other regional pricing indices. The company has two international regions: The Egypt includes onshore conventional assets in Egypt's Western Desert. The North Sea region includes offshore assets based in United Kingdom.

Black Stone Minerals LP

Buckle Inc.

The Buckle is a retailer of casual apparel, footwear, and accessories for young men and women. The company markets a selection of mainly brand name casual apparel including denims, other casual bottoms, tops, sportswear, outerwear, accessories, and footwear. The company provides denims from brands such as Miss Me, Rock Revival, KanCan, Flying Monkey, and Levi's. The company also incorporates services such as hemming, gift wrapping, layaways, a guest loyalty program, the Buckle private label credit card, personalized stylist services, and an order system that allows stores to obtain specifically requested merchandise from other the company stores or from the company's online order fulfillment center.

Cabot Oil & Gas Corporation

Cabot Oil & Gas is an independent oil and gas company engaged in the development, exploitation, exploration and production of oil and gas properties. The company operates in one segment, natural gas and oil development, exploitation, exploration and production, in the continental United States. The company's operations are primarily concentrated in one unconventional play—the Marcellus Shale in northeast Pennsylvania.

Callon Petroleum

Cimarex Energy Co.

Cimarex Energy is an independent oil and gas exploration and production company. The company's operations are mainly located in Texas, New Mexico, and Oklahoma. The company's operations are focused in two main areas: the Permian Basin and the Mid-Continent. The company's Permian Basin region encompasses west Texas and southeast New Mexico. The company's Mid-Continent region consists of Oklahoma and the Texas Panhandle.

Construction Partners

Construction Partners is a holding company. Through its wholly owned subsidiaries, the company provides a variety of products and services to infrastructure projects, with a focus on highways, roads, bridges, airports, and commercial and residential sites. The company's primary operations consist of manufacturing and distributing hot mix asphalt (HMA), paving activities, including the construction of roadway base layers and application of asphalt pavement, site development, including the installation of utility and drainage systems, mining aggregates, such as sand and gravel, that are used as raw materials in the production of HMA, and distributing liquid asphalt cement in connection with HMA production.

Diamondback Energy Inc.

Diamondback Energy is an independent oil and natural gas company focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. The company's activities are primarily focused on horizontal development of the Spraberry and Wolfcamp formations of the Midland Basin and the Wolfcamp and Bone Spring formations of the Delaware Basin, both of which are part of the larger Permian Basin in West Texas and New Mexico.

Dorchester Minerals L.P.

Dorchester Minerals is engaged in the acquisition, ownership and administration of Royalty Properties and Net Profits Interests (NPIs). The Royalty Properties consist of producing and nonproducing mineral, royalty, overriding royalty, net profits, and leasehold interests located in several counties and parishes in several states. The NPIs represent net profits overriding royalty interests in various properties owned by the operating partnership. The company's general partner is Dorchester Minerals Management LP, which is managed by its general partner, Dorchester Minerals Management GP LLC.

Granite Construction Incorporated

Granite Construction is a holding company, which delivers infrastructure solutions for public and private clients. The company's segments are: Transportation, which focuses on construction and rehabilitation of roads, pavement preservation, bridges, rail lines, airports and marine ports; Water, which focuses on water-related construction and water management solutions; Specialty, which focuses on construction of various complex projects including infrastructure/site development, mining, public safety, tunnel and power projects; and Materials, which focuses on production of aggregates, asphalt and construction related materials as well as proprietary sanitary and storm water rehabilitation products.

IES Holdings Inc.

IES Holdings is a holding company. The company has four business segments: Commercial & Industrial, which provides electrical and mechanical design, construction, and maintenance services to the commercial and industrial markets in various regional markets and nationwide in certain areas such as the power infrastructure market; Communications, which provides technology infrastructure services to corporations and independent businesses; Infrastructure Solutions, which provides electro-mechanical solutions for industrial operations; and Residential, which provides electrical installation services for single-family housing and multi-family apartment complexes.

KBR Inc.

KBR provides services and technologies across the asset and program life-cycle within the government services and hydrocarbons industries. The company has three segments: Government Solutions, which provides life-cycle support solutions to defense, space, aviation and other programs and missions for military and other government agencies; Technology Solutions, which combines technologies, equipment and catalyst supply, digital solutions and associated knowledge-based services into a global business for refining, petrochemicals, inorganic and specialty chemicals; and Energy Solutions, which provides life-cycle support solutions across the upstream, midstream and downstream hydrocarbons markets.

Laredo Petroleum Inc.

Marathon Oil Corporation

Marathon Oil is an independent exploration and production company focused on the United States resource plays. The company also has international operations in Equatorial Guinea (E.G.). The company's segments are: United States, which explores for, produces and markets crude oil and condensate, natural gas liquids (NGLs) and natural gas in the United States; and International, which explores for, produces and markets crude oil and condensate, NGLs and natural gas outside of the United States as well as produces and markets products manufactured from natural gas, such as liquefied natural gas and methanol, in E.G.

MasTec Inc.

MasTec is an infrastructure construction company operating mainly throughout North America across a range of industries. The company's segments include: Communications, which performs engineering, construction, maintenance and customer fulfillment activities related to communications infrastructure; Oil and Gas, which performs engineering, construction and maintenance services on oil and natural gas pipelines and processing facilities; Electrical Transmission, which performs engineering, construction and maintenance of electrical transmission lines and substations; and Power Generation and Industrial, which performs installation and construction of power facilities.

Matador Resources Company

Matador Resources is an independent energy company engaged in the exploration, development, production and acquisition of oil and natural gas resources in the United States, with a focus on oil and natural gas shale and other unconventional plays. The company's operations are focused on the oil and liquids-rich portion of the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas. The company also operates in the Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest Louisiana. Also, the company conducts midstream operations, through its midstream joint venture, San Mateo Midstream, LLC together with San Mateo Midstream II, LLC.

Matrix Service Company

Matrix Service provides engineering, fabrication, infrastructure, construction, and maintenance services. The company's segments are: Electrical Infrastructure, which consists of power delivery services provided to investor owned utilities; Oil Gas and Chemical, which serves customers who are engaged in refining crude oil and processing, fractionating, and marketing of natural gas and natural gas liquids; Storage Solutions, which consists of work related to aboveground storage tanks and terminals; and Industrial, which consists of work for integrated iron and steel companies, main mining and minerals companies engaged in the extraction of copper, as well as companies in other industries.

Murphy Oil Corporation

Murphy Oil is a holding company. Through its subsidiaries, the company is an oil and natural gas exploration and production company. The company explores for and produces crude oil, natural gas and natural gas liquids worldwide. The company's principal exploration and production activities are conducted in United States by wholly owned Murphy Exploration & Production Company - USA and its subsidiaries, in Canada by wholly-owned Murphy Oil Company Ltd. and its subsidiaries, and in Australia, Brazil, Brunei, Mexico and Vietnam by wholly-owned Murphy Exploration & Production Company - International and its subsidiaries. The company's hydrocarbon production is in United States, Canada and Brunei.

MYR Group Inc.

MYR Group is a holding company of electrical construction service providers. Through its subsidiaries, the company serves the electric utility infrastructure, commercial and industrial construction markets located throughout the U.S. and Canada. The company manages its operations through two segments: Transmission and Distribution, which provides services on electric transmission and distribution networks and substation facilities; and Commercial and Industrial, which provides services such as the design, installation, maintenance and repair of commercial and industrial wiring, installation of traffic networks and the installation of bridge, roadway and tunnel lighting.

NV5 Global Inc.

NV5 Global is a provider of technical engineering and consulting services, providing solutions to public and private sector clients in the energy, transportation, water, government, hospitality, education, healthcare, commercial and residential markets. The company's operations are organized into two reportable segments: Infrastructure, which includes its engineering, civil program management, and construction quality assurance, testing, and inspection practices; and Building, Technology and Sciences, which includes its energy, environmental, and building program management practices.

Parsley Energy Inc. Class A

Parsley Energy is a holding company. Through its subsidiaries, the company is an independent oil and natural gas company focused on the acquisition, development, exploration and production of unconventional oil and natural gas properties in the Permian Basin. The Permian Basin is located in West Texas and southeastern New Mexico. The company's properties are located in two sub areas of the Permian Basin, the Midland and Delaware Basins, where the company focuses on horizontal development drilling.

PDC Energy Inc.

PDC Energy is an independent exploration and production company that acquires, explores and develops properties for the production of crude oil, natural gas, and natural gas liquids with operations in the Wattenberg Field in Colorado and the Delaware Basin in Texas. The company's operations in the Wattenberg Field are focused in the horizontal Niobrara and Codell plays and its Delaware Basin operations are primarily focused in the Wolfcamp zones. The company is engaged in two operating segments: its oil and gas exploration and production segment and its gas marketing segment.

Primoris Services Corporation

Primoris Services, through its subsidiaries, provides a range of construction, fabrication, maintenance, replacement, and engineering services to main public and private utilities, petrochemical companies, energy companies, municipalities, state departments of transportation and other customers. The company installs, replaces, repairs and rehabilitates natural gas, refined product, water and wastewater pipeline systems; large diameter gas and liquid pipeline facilities; electric utility systems; and heavy civil projects, earthwork and site development. The company also constructs mechanical facilities and other structures. Finally, the company provides process and product engineering services.

Range Resources Corporation

Range Resources is a holding company. Through its subsidiaries, the company is an independent natural gas, natural gas liquids and oil company, engaged in the exploration, development and acquisition of natural gas and oil properties, located in the Appalachian and North Louisiana regions of the United States, primarily in the Marcellus Shale in Pennsylvania and the Lower Cotton Valley formation in Louisiana.

SM Energy Company

SM Energy is an independent energy company engaged in the acquisition, exploration, development, and production of oil, gas, and natural gas liquids in the state of Texas. The company's operations are concentrated in the Midland Basin and South Texas.

Southwestern Energy Company

Southwestern Energy is a holding company. Through its subsidiaries, the company is an independent energy company engaged in exploration, development and production activities, including the related marketing of natural gas, oil and natural gas liquids (NGLs) produced in its operations. The company's primary business is the exploration for, and production of, natural gas, oil and NGLs. The company's operations in northeast Pennsylvania are primarily focused on the unconventional natural gas reservoir known as the Marcellus Shale, and its operations in West Virginia and southwest Pennsylvania are focused on the Marcellus Shale, the Utica and the Upper Devonian unconventional natural gas, oil and NGL reservoirs.

Sterling Construction Company Inc.

Sterling Construction is a construction company that focuses in heavy civil construction and infrastructure rehabilitation as well as residential construction projects. The company operates primarily in Arizona, California, Colorado, Hawaii, Nevada, Texas and Utah, as well as other states. The company's heavy civil construction projects include highways, roads, bridges, airfields, ports, light rail, water, wastewater and storm drainage systems, foundations for multi-family homes, commercial concrete projects and parking structures. Residential construction projects include concrete foundations for single-family homes.

Tillys

Tilly's is a retailer of casual apparel, footwear and accessories for young men, young women, boys and girls. The company's stores are located in malls, lifestyle centers, power centers, community centers, outlet centers and street-front locations. Customers may also shop online, where the company features the same assortment of product as is carried in its stores, supplemented by additional online-only styles. The company provides a mix of merchandise for young men, young women, boys and girls across the apparel, footwear and accessories categories. The company's apparel merchandise includes branded, fashion, and core styles for tops, outerwear, bottoms, and dresses.

Tutor Perini Corporation

Tutor Perini is a construction company. The company operates in three segments: Civil, which focuses on public works construction and the replacement and reconstruction of infrastructure; Building, which provides services to various building markets for private and public works customers, including hospitality and gaming, transportation, health care, commercial offices, sports and entertainment, education, correctional facilities, biotech and pharmaceutical, among others; and Specialty Contractors, which focuses on electrical, mechanical, plumbing, heating, ventilation and air conditioning, fire protection systems and pneumatically placed concrete for civil and building construction projects.

Viper Energy Partners LP

Willdan Group

Willdan Group is a holding company. Through its subsidiaries, the company is a provider of technical and consulting services to utilities, private industry, and public agencies of government. The company provides services in two segments: Energy, which services include surveys, program design, master planning, benchmarking analyses, design engineering, construction management, performance contracting, installation, alternative financing, and measurement and verification services; and Engineering and Consulting, which provides civil engineering-related construction management, building and safety, city engineering, city planning, geotechnical, and other engineering consulting services to the company's clients.

WPX Energy Inc.

WPX Energy is an independent oil and natural gas exploration and production company engaged in the exploitation and development of long-life unconventional properties. The company is focused on exploiting, developing and growing its oil positions in the Delaware Basin (a subset of the Permian Basin) in Texas and New Mexico and the Williston Basin in North Dakota.

Provider
Vermilion Research
Vermilion Research

Vermilion Research delivers timely, actionable, and unique research inputs to professional investors. Our research strategists highlight securities which we believe are at major inflection points, based on our various proprietary technical indicators, and offer asymmetric risk/return profiles. We believe our research methodology, which is not limited by industry sector or market capitalization, enables us to deliver superior investment recommendations.

Our process begins by organizing all actively traded stocks into coherent sectors, then into logical industry groups. We then apply our proprietary relative strength tools to identify developing price trends. Once attractive trends are identified within a selected sectors or groups, we screen for individual stocks which we believe offer the best risk/reward profile. Vermilion offers U.S. and global equity market research products. Vermilion’s research team, which has received numerous awards and accolades, has a combined 70 year of experience in the analysis of investment securities.

Analysts
Dave Nicoski

Ross LaDuke

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