While the discipline of technical analysis has been around for decades, it also carries with it a sea of criticism. In particular, any chart can look like anything if you’re creative enough – it’s Wall Street’s version of the Rorschach test. However, the Barchart “Long Term 100% Buy Signals” screener cuts through the noise and gives you the most compelling ideas.
Per the website, “[t]his screener finds bullish stocks that have sustained a 100% Overall Buy Signal (the combination of all 13 technical indicators that make up the Barchart Opinion) for over 1 month.” The assessment is based on Barchart’s algorithms that have detected short, medium and long-term indicators that point to a bullish outlook.
Of course, a security can temporarily ping as a compelling opportunity at any moment in time. What separates ideas identified by the 100% Buy Signals screener is consistency. As stated earlier, the stock in question must consistently generate buy ratings across the timeframe spectrum for at least one month. This way, the screener is likelier to identify sustainable ideas rather than flashes in the pan.
One candidate that stands out is independent hydrocarbon exploration and production specialist Pioneer Natural Resources (PXD).
Technical Profile Points to an Encouraging Outlook
First and foremost, what makes PXD stock stand out is its Barchart Opinion indicator of 100% Buy. This assessment is backed up by bullish signals across the short, medium and long-term timeframes. In particular, PXD’s 20-day moving average, 50 DMA and 200 DMA indicate optimism. As well, these signals have been in place over the past 30 days.
Switching over to the “Strength & Direction” subcategory, we find that the strength of the technical indicators is mostly set at maximum. However, in terms of direction, PXD stock has pinged some weakening signals. Rather than a warning sign, however, these metrics could be a contrarian indicator.
Publicly traded securities never trade along a perfectly linear trajectory. Even the most bullish prospects require a breather – either a consolidation phase or a temporary correction – to move onto higher plateaus.
For PXD stock, its acceleration has slowed since the April 10 session. At the moment, it appears that the security is trading inside a horizontal consolidation pattern. That’s not surprising. Following a large spike move – which in this case occurred between late February to early April – stocks often trade sideways before bouncing higher.
In technical analysis, this dynamic is referred to as a continuation pattern. For PXD stock, it’s possible that it could be charting what’s known as a bullish flag formation – Barchart’s education post provides a visual explanation of this pattern.
Better Value Than Advertised
Of course, no investment idea is perfect. One of the drawbacks of acquiring hot stocks is that they tend to have hot valuations. Admittedly, PXD stock is not exempt from this logic.
Currently, shares trade hands at 3.32X last year’s revenue. That’s rich for the exploration and production category, which is also known as the upstream component of the hydrocarbon value chain. On average, upstream specialists carry a sales multiple of 2.09X.
However, the most optimistic revenue target for fiscal 2024 stands at $27.02 billion. As I’ll explain below, the outside fundamentals – particularly the geopolitical dynamic – suggest that this optimism is justified. Assuming that the shares outstanding count remains the same at 233.62 million, PXD stock is currently trading at 2.38X projected high-side 2024 revenue.
In fairness, it’s not quite an apples-to-apples comparison because we would also need to conduct an average forward sales multiple of the entire upstream category. However, not every company enjoys analyst coverage so such an analysis is difficult to make.
Nevertheless, the point stands that when considering the likely trajectory of PXD stock, it’s not as richly priced as it might appear. Further, the current consolidation phase might give speculators an opportunity to acquire Pioneer Natural at a relative discount.
Cynically Attractive Fundamentals
Earlier this month, tensions flared in the Middle East as Iran and Israel launched missiles at each other, an act which had its roots in the bombing of the former nation’s embassy in Syria. Fortunately, cooler heads appear to be prevailing, though a miscalculation could easily spiral circumstances out of control. And that could greatly impact global oil supply chains.
In turn, upstream enterprises have become as vital as ever. Simply put, western nations need more reliable sources of hydrocarbons should the Middle East become embroiled in a major escalation. What’s particularly worrying from a stability standpoint, though, is Russia’s ongoing invasion of Ukraine. In a bid to stymie the invasion, Ukrainian forces have launched attacks against Russian energy infrastructure.
With no sign that the conflict will come to an end anytime soon, global oil supply will likely be disrupted irrespective of the situation in the Middle East. As such, PXD stock could conceivably continue rising.
The Takeaway: Fundamentals Support the Technical Argument for PXD Stock
While there could be thousands of ideas that appear technically enticing, Barchart’s Long Term 100% Buy Signals screener only focuses on the most viable candidates based on algorithms targeting strength and consistency. In addition, what makes PXD stock so attractive is that the fundamentals – both company specific and outside considerations – support the bullish argument. For speculators, it’s well worth putting Pioneer Natural Resources on your radar.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
