Denbury Resources (DEN) is a rare pick in these tough markets. It is making a new high when so many stocks are in a downtrend and even below their 50-day moving average. The reason has as much to do with the oil stock's leadership as with the sector's bullish near-term outlook.
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The oil exploration company has a perfect Composite Rating of 99 and a near-ideal Relative Strength Rating of 97. More significantly, its relative strength line, which compares the stock's performance with the S&P 500, has risen to a 52-week high. Denbury ranks No. 1 in the U.S. oil exploration and production group. The group holds 12th place among IBD's 197 industry groups.
Oil stocks got a big push since Wednesday's OPEC+ meeting, when major producers decided to slash oil production by 2 million barrels a day starting November. The ongoing energy crisis due to the Russia-Ukraine war has also given wings to these stocks.
The stronger performance of this group has led to improved RS Ratings for oil stocks. For Denbury, the RS Rating has improved dramatically over the past three months, when it was below 40.
Shares of the oil stock built out a strong cup base starting Aug. 24. They are trying to breakout as the stock rose above the buy point of 94.05. Volume was lighter than average as the stock reached its new high, which is not a good sign for the breakout try.
Denbury holds oil reserves in the Gulf Coast regions of Mississippi, Texas, Louisiana and in the Rocky Mountain region in Montana, North Dakota and Wyoming. The company also operates carbon utilization and storage pipelines.
The Plano, Texas-based company has a strong record of sales and earnings growth, according to IBD MarketSmith. Revenue of $482 million in the second quarter increased 59% from $280.5 million in the second quarter of 2021. Earnings was $2.83 per share compared to a loss of $1.52 over the same period.
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