As FOMC Meets, Sell Weak Oil Stocks Newfield (NFX) and Pioneer (PXD)

12/13/2017 3:30 pm EST


Karee Venema

Financial Writer, Schaeffer's Investment Research

Both Newfield Exploration and Pioneer Natural Resources are trading near trendline resistance, and are at risk for downgrades, says Karee Venema, deputy editor at Schaeffer's Investment Research.

The Federal Open Market Committee (FOMC) is expected to announce a rate hike when it concludes its policy-setting meeting Wednesday afternoon, which would mark its fifth since 2015, and its third this year.

While these two names are some of the best stocks to own after the Fed raises interest rates, oil issues Newfield Exploration Co. (NFX) and Pioneer Natural Resources (PXD) are two of the worst stocks to own.

Here's a closer look at shares of NFX and PXD in view of today's central bank decision.

Newfield Exploration stock at risk for bearish analyst attention

Newfield Exploration stock has struggled in 2017, down 26% so far. And while the energy shares have moved higher in recent months along with oil prices -- up 23% from their late-August annual low of $24.41 -- they have run out of steam near the 40-week moving average.

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Today, NFX is down 2.3% at $29.53 as crude futures retreat, and could be in for bigger losses by week's end, if history is any guide.

According to data from Schaeffer's Senior Quantitative Analyst Rocky White, NFX has averaged a loss of 5.27% in the week after the Fed raises rates -- looking back to 2015 -- and has not been positive once. This is the second-worst of any stock on the list.

The oil stock is at risk for downgrades and price-target cuts, too, should it continue to underperform. Of the 19 analysts covering NFX stock, 12 maintain a Strong Buy rating, while the average 12-month price target of $36.64 stands at a 23.2% premium to current trading levels.

PXD stock is struggling under key technical resistance

Shares of Pioneer Natural Resources are down 12.5% year-to-date -- including today’s 0.9% drop to trade at $157.62. The stock began stair-stepping higher after skimming 52-week-low territory near $125.50, but this rebound has been stopped short by the oil stock's 200-day moving average.

PXD shares could continue to struggle under this descending trendline in the near term, considering it has not turned in positive weekly performance after the Fed hiked interest rates since 2015. On average, the security has shed 3.7% on the week.

The door is wide open for analysts to downwardly revise their outlooks, should this negative price action continue for Pioneer Natural Resources stock.

Twenty-six of the 29 brokerages covering the PXD shares maintain a Buy or better recommendation, with not a single Sell to be found. Plus, the consensus 12-month price target of $187.67 stands at a more than 19% premium to PXD's current stock price.

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