Noble Corp. (NE) is a $7.8 billion offshore oil drilling contractor that hit a low last week of $27.33, which was just below the August low of $27.68. The daily chart shows a potential double-bottom formation, line a.
Sunoco Inc. (SUN) is a $4 billion oil and gas refining company that currently yields 1.8%. It made a low last week of $28.79, which was well above the August low of $27.36.
What It Means: The positive weekly divergence in the OBV for crude oil does suggest that a major bottom is being formed. To confirm the divergence, the OBV needs to move above its previous high, which is measured using the same rules I discussed in the most recent Trading Lesson (see “Accurately Analyzing RSI Divergences”).
Once USO, NE, and SUN have lower daily closes, we should see a 38.2%-50% pullback that will set up a good buying opportunity.
How to Profit: For the United States Oil Fund (USO), go long at $31.68 with a stop at $28.77 (risk of approx. 9.1%).
For Noble Corp (NE), go long at $29.56 with a stop at $27.08 (risk of approx. 8.4%).
For Sunoco Inc. (SUN), go long at $31.74 with a stop at $28.59 (risk of approx. 9.9%).