Out Fox The $treet

Last Friday, oil services companies Baker Hughes (BHI) and Schlumberger (SLB) reported earnings that helped drive up the Oil Services Index (OIH) by 1.2%. A strong performance considering the market was weak with the S&P 500 falling more than 1%. If anything, the price jumps were more based on a relief rally that the industry didn't keep falling off a cliff after a very weak start to the year. Stocks in the sector, including Weatherford International (WFT) , had been trading close to two year lows. The industry in general had been undergoing a boom with demand for more complex and time consuming drilling, completion, and pressure pumping services due to drilling deeper wells in more harsh conditions or requiring more complex techniques due to horizontal drilling versus the previously more common vertical drilling. Read the full article at Seeking Article Disclaimer: Long WFT. Please review the disclaimer page for more details. 

After the close on Monday, Chesapeake Energy (CHK) filed for an IPO of its oilfield services division. Based on initial review of the S-1, Chesapeake Oilfield Services (COS) should be avoided at best if not shorted. Naturally this will highly depend on the ultimate valuation place on the stock once it prices and starts trading. Chesapeake intends to raise $862M in a much announced IPO of the oilfield services division that performs a big portion of the work for Chesapeake itself. The interesting part is that the sector is under pressure so a lot of investors will see this as a desperate move. Industry leader Haliburton (HAL) is around 52 week lows and last year's fracing IPO C&J Energy Services (CJES) trades near lows as well. Additionally, Chesapeake has made it clear that it needs to raise cash so most contrarian investors might think that such an IPO might be priced to sell. Unfortunately, the funds to be raised and the past comments from the company don't sugges...

After watching a Mad Money feature on little known Key Energy Services (KEG), it got me to wondering what other oil service plays I didn't really know. Everybody has heard of the big players in the sector such as Haliburton (HAL), Schlumberger (SLB), and Baker Hughes (BHI). What about the second tier companies? Hydraulic fracturing and horizontal drilling remain all the rage, even with natural gas prices plunging to 10 year lows this year. Even with expected rigs drilling for natural gas declining, it wouldn't be surprising to see them move directly into oil shale plays as oil remains around $100. Not to mention one needs to be careful when focusing on the current price of natural gas as future prices on the NYMEX remain in the $4-5 range. Read full story on Seeking Alpha. Disclosure: Long CJES. Please review the disclaimer page for more details

Raise your hand if you realized that by early 2012 there will be more deepwater rigs in the Gulf of Mexico than when the BP spill occurred. According to ODS-Petrodata, 40 deepwater rigs will be in the Gulf compared to 37 before the spill. As an investor and especially one that has invested in the sector, this news caught my attention as something the general investing public doesn't understand yet. So what stocks will be able to take advantage of this trend in 2012? First, companies that focus on drilling deepwater wells in the Gulf could benefit the most with the rising demand and possibly less competition as many rigs fled the area. Second, any companies in the deepwater segment should benefit with rising sector demand and higher global utilization lifting all day rates regardless of location. Read the full article at Seeking Alpha. Disclosure: Long ATW. Please review the disclaimer page for more details.

Anybody following this blog knows that I've been talking about the inverse Head & Shoulders charts that have shown up lately. The Oil Services (OIH) still has potential as well as the numerous other individual stocks including the one I've mentioned. Today though Sandridge Energy (SD) highlighted how the chart works to perfection. Not only does SD have what amounts to a near perfect shoulder setup, but the stock rocketed 23% on a JV deal. This move helped form what ultimately could be the breakout above the neckline right around todays close around $8. Looks like a move straight up to $12 might be possible now. Anybody catching that reversal near $4.5 in early October is sitting very strong right now. See chart blow. Disclosure: No positions mentioned. Please review the disclaimer page for more details.  Update 12/23 2:40pm: SD jumped to $9 today, but has since fallen back to $8.5. Looks like a clear breakout though the stock quickly stalled. 

As I've tweeted about a few times, the market has numerous stocks set up with inverse head and shoulder formations. These are usually indications of a bullish pattern where a stock or ETF is the process of a significant breakout off a bottoming process. In most cases, the breakout corresponds with the lows from the July/August plunge. Assuming stocks form this bullish technical indicator, it can be expected to reach back to levels where the plunge began. In some cases this calls for a major rally. Naturally that doesn't seem likely these days with the European debt crisis and fears of a major slowdown in China. Unfortunately for most investors that is exactly why and when it happens. The least amount of investors expect a major rally in stocks so they all pile on the upswing. It was interesting tonight to see Cramer focus on the potential H & S in the Oil Services ETF (OIH). Having not seen much mention of this occurence in other stocks, I wasn't beginning to wond...

Early Monday morning, Superior Energy Services ( SPN )  agreed to merge with Complete Production Services ( CPX ) by paying a 61% premium over Friday's selling price. According to the press release, the combination creates a premier diversified mid-cap oilfield services company. In essence, SPN wanted scale in order to compete successfully with the likes of Haliburton ( HAL ) and Schlumberger ( SLB ) in the fast growing hydraulic fracturing market in the US and enhanced size to grow internationally. Not to mention that the huge sell-off in CPX stock over the last few months provided an attractive entry point. CPX peaked over $42 in July and hasn't even cracked above $30 with this huge premium offered. Read the full article at Seeking Alpha. Disclosure: Long CJES. Please review the disclaimer page for more details.