Ink Research December 11, 2023 - Oil and gas stocks took it on the chin last week, dragging the S&P/TSX Capped Energy Index down 6.3%. Investors appeared to be selling due to fears ranging from crude oversupply to a possible global recession. Insiders have continued to buy the pullback with the INK Energy Indicator peaking at 163% at the end of November. At that point, there were 1.6 stocks in the sector with key insider buying for every one stock with key insider selling over the preceding 60 days. Most importantly, indicator peaks often coincide with key support levels for stocks. Consequently, we are upgrading our Energy sector reading to undervalued.
It was June 28th when the INK Energy Indicator was last at 163%, and the S&P/TSX Capped Energy Index subsequently rallied 24% into its October 19th peak. There is no guarantee that history will repeat and the feared global recession may yet arrive which would be bad for energy markets. Nevertheless, insiders appear to be betting that the selloff this fall is an overreaction to seasonal commodity price weakness.