BTIG warns oil refining stocks face potential correction after record gains

Investing.com -- BTIG said oil refining stocks may face a correction after the S&P 500 Oil & Gas Refining and Marketing Index (S5OILR) gained approximately 124% year-to-date, marking its strongest performance in 30 years.

The index currently sits 122% above its 200-week moving average, representing the second-widest spread in its history, according to BTIG. The index also shows a weekly RSI of 81.

Historical data shows that when the index had a weekly RSI above 80 and traded at least 50% above its 200-week moving average, it declined in 7 out of 8 instances, with a median 12-week return of negative 7.2%, BTIG noted.

The firm said the 4-week average and median returns at similar RSI levels have been negative 2.8% and negative 3%, respectively, with negative outcomes 75% of the time.

BTIG compared the current refining sector situation to the semiconductor and AI trade in late June, suggesting that positive fundamentals may already be priced into the stocks for the next 6 to 12 months.

The Oil Service ETF (OIH) declined 1.6% last week, which BTIG said may indicate broader weakness in the energy sector.

The firm identified Marathon Petroleum (NYSE: MPC), Valero (NYSE: VLO), Phillips 66 (NYSE: PSX), PBF Energy (NYSE: PBF), and Delek Holdings (NYSE: DK) as stocks that present poor risk-reward profiles over the next 4 to 8 weeks. None of these stocks carry ratings from BTIG.

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