With the price of crude pulling back recently, Jim Cramer has seen many of the gains from the recent rebound in black gold go right down the drain. That is why he thinks it is important to revisit the oil patch, and find out if the rebound is gone forever.
The "Mad Money" host turned to Robert Moreno, a chartist and colleague of Cramer's at RealMoney.com, who is also the publisher of RightViewTrading.com. Cramer's goal was to get a better read on the two most important subgroups of the oil patch — the large integrated oils, like Exxon Mobil, and the oil service companies, like Schlumberger.
The last time Cramer checked in with Moreno, he made a bold call and said that Exxon was about to bring the entire oil complex higher. His call was right, with Exxon up now more than 10 percent in four weeks.
However, Moreno now sees Exxon coming down from its recent high and thinks investors should reappraise the entire group. So, even though the big oil companies led the energy rally earlier in the month, he now says that they are ready to pause and consolidate.
But that doesn't mean there will be a sell-off in oil. Instead, Moreno predicted a change in leadership. He anticipates that as the big oil companies consolidate, the oil service stocks could be ready to breakout.
Looking at the daily chart of Exxon Mobil, Moreno found that the stock could have encountered a tough ceiling of resistance that may keep the stock down for a while. Additionally, the slow stochastic oscillator, which is used to measure if a stock is overbought or oversold, indicated that Exxon is in extreme overbought territory.
So, while Exxon may not be crushed completely, Moreno does think it's ready to consolidate and trade sideways for a while to breathe.
However, Moreno found many things to like when he took a look at the daily chart of the oil service ETF, called OIH. The lows in August and September appear to be a double bottom, which is a bullish pattern.
Additionally, the relative strength index, which measures momentum, and the moving average convergence divergence line, a tool used to predict changes in a stock's trajectory, both have moved into positive territory for OIH.
"In other words, all of these indicators suggest to Moreno that the big boys are loading up on the oil service stocks," Cramer said. (Tweet this)
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Ultimately, Moreno thinks that oil service Cramer-fave company Schlumberger could easily rally up to its 200-day moving average, at about 6 points above $82.
"You know that I'm a fan of Schlumberger — I love how it has been able to aggressively lower its costs, and I think the fact that its two largest competitors, Halliburton and Baker Hughes, are merging, will mean that the whole oil service industry has a lot more pricing power," Cramer said.
Moreno's charts ultimately predict that while the big boy oil companies are about to take a breather, the oil service stocks like Schlumberger could be ready to roar. On a day where oil was slammed, this may seem controversial, but Cramer wouldn't be surprised if Moreno was right again.