Report
Dave Nicoski ...
  • Ross LaDuke

Vermilion Compass: Weekly Equity Strategy

The recent successful test of support at the 200-day moving average has paved the way for a meaningful bounce higher on the S&P 500. Given this bounce, we have become incrementally more bullish. In today's report we highlight the bullish implications of the recent move higher for the broad market as well as other big picture trends:

• Bullish implications. Not only has the 200-day moving average and prior lows continued to hold for the S&P 500, but the index is also hitting a higher high relative to mid-April - a bullish development. Additionally, the index is inflecting topside a descending triangle resistance level - yet another bullish development... see below.

• Sector Relative Strength Rankings. Generally speaking, cyclicals continue to lead. We view this as a healthy signal for the broad market. Fueled by strength in oil prices, Energy has reclaimed the top position among our cap- and equal-weighted rankings. Equal-weighted Technology, Consumer Discretionary, Financials, and Transportation aren't far behind, and all find themselves in the top half of our ranks... see page 2.

• 10-Year Treasury and the USD. An area of concern, the yield on the 10-year Treasury remains just below the critical 3.00% resistance level. Given the rapid advance of the USD, we would expect some sort of counter trend pullback. We'll continue to monitor yields and the USD closely, along with any potential implications for equity markets... see page 3.

• Growth vs. Value; Large vs. Small. No changes here. We continue to favor growth over value, and we remain market-cap neutral... see pages 3-4.

• Market internals. Discretionary vs. Staples ratios, the percent of stocks above their 50-day moving average, and the advance-decline line for the S&P 500 are all confirming the market's recent advance (bullish). Failing to confirm the market's recent advance is the S&P 500 percentage of stocks above their 200-day moving average... see pages 4-5.

• In today's report we highlight attractive and actionable groups within Energy: EN-02 Oil & Gas, Global, Large-Cap, EN-08 Oil and Gas E&P, Domestic, Large-Cap, and EN-10 Oil and Gas E&P, Domestic Small-Cap... see pages 10-23.
Underlyings
Anadarko Petroleum Corporation

Anadarko Petroleum is an independent exploration and production company. The company also participates in the hard-minerals business through royalty arrangements. The company's reporting segments are as follows: Exploration and Production, which is engaged in the exploration, development, production, and sale of oil, natural gas, and natural-gas liquids (NGLs) and in advancing its Mozambique liquefied natural gas project toward final investment decision; and WES Midstream and Other Midstream, in which these two segments engage in gathering, processing, treating, and transporting the company and third-party oil, natural-gas, and NGL production as well as gathering and disposal of produced water.

Carrizo Oil & Gas Inc.

Carrizo Oil & Gas is an energy company which, together with its subsidiaries, is engaged in the exploration, development, and production of crude oil, natural gas liquids, and natural gas from resource plays located in the U.S. The company's operations are principally focused in proven, producing oil and gas plays in the Eagle Ford Shale in South Texas and the Permian Basin in West Texas.

CONOCOPHILLIPS

ConocoPhillips is an exploration and production company engaged in exploring for, producing, transporting and marketing crude oil, bitumen, natural gas, liquefied natural gas and natural gas liquids. The company's segments include: Alaska, which operates in Alaska; Lower 48, which operates in the United States and the Gulf of Mexico; Canada, which operates in Alberta and British Columbia; Europe and North Africa, which consists of operations and exploration activities in Norway, the United Kingdom and Libya; Asia Pacific and Middle East, which operates in China, Indonesia, Malaysia, Australia, Qatar, and Timor-Leste; and Other International, which operates in Colombia, Chile and Argentina.

Continental Resources Inc.

Continental Resources is an independent crude oil and natural gas company engaged in the exploration, development, and production of crude oil and natural gas mainly in the North, South and East regions of the U.S. The North region consists of properties north of Kansas and west of the Mississippi River and includes North Dakota Bakken, Montana Bakken, and the Red River units. The South region includes all properties south of Nebraska and west of the Mississippi River including various plays in the South Central Oklahoma Oil Province and Sooner Trend Anadarko Canadian Kingfisher areas of Oklahoma. The East region is comprised of undeveloped leasehold acreage east of the Mississippi River.

ENI S.p.A. ADS

EOG Resources Inc.

EOG Resources, together with its subsidiaries, explores for, develops, produces and markets crude oil, natural gas liquids and natural gas primarily in main producing basins in the United States, The Republic of Trinidad and Tobago, The People's Republic of China, Canada and, from time to time, select other international areas.

Equinor ASA

Hess Corporation

Hess is a global exploration and production company engaged in exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquid (NGL), and natural gas with production operations located primarily in the United States, Guyana, the Malaysia/Thailand Joint Development Area, Malaysia and Denmark. The company's Midstream operating segment provides fee-based services, including gathering, compressing and processing natural gas and fractionating NGL; gathering, terminaling, loading and transporting crude oil and NGL; storing and terminaling propane, and water handling services primarily in the Bakken shale play in the Williston Basin area of North Dakota.

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.

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.

Noble Energy Inc.

Noble Energy is an independent energy company, engaged in crude oil and natural gas exploration and production. The company's operating areas include: U.S. onshore, primarily the DJ Basin, Delaware Basin and Eagle Ford Shale; U.S. offshore Gulf of Mexico; Eastern Mediterranean; and West Africa. The company's Midstream segment develops, owns, operates and acquires domestic midstream infrastructure assets, or invests in other midstream entities, with existing focus areas being the DJ and Delaware Basins. The company's activities include geophysical and geological evaluation; analysis of commercial, regulatory and political risks; and exploratory and development drilling leading to production, where appropriate.

Occidental Petroleum Corporation

Occidental Petroleum has three reporting segments: oil and gas, which explores for, develops and produces oil and condensate, natural gas liquids (NGL) and natural gas; chemical, which mainly manufactures and markets basic chemicals (chlorine, caustic soda, chlorinated organics, potassium chemicals, ethylene dichloride, chlorinated isocyanurates, sodium silicates and calcium chloride) and vinyls (vinyl chloride monomer, polyvinyl chloride and ethylene); and marketing and midstream, which purchases, markets, gathers, processes, transports and stores oil, condensate, NGL, natural gas, carbon dioxide and power.

Oil company LUKOIL PJSC Sponsored ADR

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.

Petroleo Brasileiro S/A ADS

Pioneer Natural Resources Company

Pioneer Natural Resources is a holding company. Through its subsidiaries, the company is engaged in oil and gas exploration and production. The company explores for, develops and produces oil, Natural Gas Liquids and gas within the United States, with operations in the Permian Basin in West Texas. The company's portfolio of resources are located in the Spraberry/Wolfcamp oil field.

Sasol Ltd. ADS

SRC Energy Inc

SRC Energy is an independent oil and gas company engaged in the acquisition, development, and production of oil, natural gas, and natural gas liquids in the D-J Basin. It contains hydrocarbon-bearing deposits in several formations, including the Niobrara, Codell, Greenhorn, Shannon, Sussex, J-Sand, and D-Sand. The company's oil and natural activities are focused in the Wattenberg Field, in Weld County, CO, an area that covers the western flank of the D-J Basin. The company is focused on the horizontal development of the Codell formation as well as the three benches of the Niobrara formation, which are all characterized by high liquids content.

Viper Energy Partners LP

Whiting Petroleum Corporation

Whiting Petroleum is an independent oil and gas company engaged in development, production, acquisition, and exploration activities primarily in the Rocky Mountains region of the U.S. The company's existing operations and capital programs are focused on organic drilling activities and on the development of previously acquired properties, while selectively pursuing acquisitions that complement its existing properties. The company principally sells its oil and gas production to end users, marketers and other purchasers that have access to nearby pipeline or rail takeaway. In areas with no access to gathering pipelines, oil is trucked or transported to terminals, market hubs, refineries or storage facilities.

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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