Oil may be nearing a bottom, and we’re adding energy shares before the move higher

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We’re buying 25 shares of Pioneer Natural Resources (PXD) at roughly $223 each. Following Wednesday’s trade, Jim Cramer’s Charitable Trust will own 175 shares of PXD, increasing its weighting in the portfolio to 1.39% from 1.2%. The price of a barrel of West Texas Intermediate crude was moving sharply lower Wednesday, down more than 4% to the low $70s on fears of a global recession. Although energy stocks are outperforming the move in the commodity this afternoon — and are actually up on the day — technical factors suggest a rebound in oil could soon be in the works, making energy stocks attractive to buy. The technicals we are focused on were highlighted by analyst Carly Garner on Tuesday evening’s “Mad Money.” For this year, Garner expects oil to bounce around between $65 to $70 per barrel on the low end to the mid-$90s or maybe the low-$100s on the high end. From a technical perspective, this means we are near the bottom of oil’s range and suggests dips should be bought ahead of a larger rebound. Since Garner got it so right last year, accurately predicting that oil would return to its previous trading channel once sanctioned Russian oil got rerouted through places like China and India, we’re hesitant to go against her call. Her work still suggests WTI could have some more downside to go, but we are willing to be buyers here because the exact timing is always too tough to predict and the risk-reward gets better as prices move lower. We’re adding to Pioneer Natural Resources because it has some of the best oil assets in the Permian Basin, located in western Texas and southeastern New Mexico. PXD has high realized pricing and low cash costs. Management’s disciplined approach to maximizing cash flow generation has led to a peer-leading cash return framework. Even at a floor of $60 per barrel on WTI, Pioneer believes it can pay out $10-per-share in annual dividends, which would equate to a roughly 4.5% annual dividend yield at the current stock price. That’s still well above the S & P 500 annual dividend yield average of about 2.2%. At a more normalized level of $80 per barrel, Pioneer thinks the annual payout will be $19 per share, offering an annual yield of about 8.5%. Share repurchases are also a compelling factor too, and management is likely making aggressive use of its $4 billion share repurchase program down at these levels. When PXD shares fell in the third quarter, the company pounced at the opportunity to repurchase $500 million worth at an average price of $218 per share. (Jim Cramer’s Charitable Trust is long PXD. See here for a full list of the stocks.) — CNBC Investing Club’s Zev Fima contributed to this report. As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Traders work on the floor of the New York Stock Exchange during morning trading on January 04, 2023 in New York City.

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