part 3:
Furthermore, XLE's Schaeffer's put/call open interest ratio (SOIR) has jumped from its May 20 reading of 2.98 in the 15th percentile to its current perch of 4.77 in the 54th percentile. In addition, the SOIR for the Oil HOLDRS Trust (OIH: sentiment, chart, options) comes in at 2.49 (82nd percentile), as puts more than double calls among near-term options.
Short interest for the group stands as a potential source of fuel. In July, the number of XLE shares edged 2.50 percent higher to 48.7 million shares, just shy of its multi-year high of 53.5 million reached in May. The number of OIH shares sold short also popped 2.6 percent higher to 18 million, tagging a new multi-year high.
Zooming in for a closer look at the oil services sector, we find that short interest for its major components saw an average increase of more than 10 percent in June (July data is not yet available). Furthermore, the average short-interest ratio sits just shy of four and short interest accounts for a respectable chunk of the available float on these securities. It will be interesting to see if (and how much) short sellers increased their positions on the recent pullback in oil.
Overall, the various components within the oil sector have earned Schaeffer's Equity Scorecard rankings indicating they still have some room to run. Not only do both the OIH and XLE rate a 7.0 out of 10, but the average score for individual stocks stands at 6.5. With several of the indices and ETFs testing key support levels and pessimism lingering near extremes, the oil services sector could prove to have a few pockets of strength left within it |
