Why Oil Stocks Like Coterra Energy (CTRA) Are Sitting Ducks in July 2025

The energy sector has long been a rollercoaster ride for investors, but this July, the risks are stacking up higher than ever. Coterra Energy (CTRA), a mid-cap player in oil and natural gas, is emblematic of the vulnerabilities lurking in energy equities. Historical data, technical indicators, and macroeconomic headwinds all point to a bearish setup for oil stocks this summer—here's why investors should think twice before doubling down.

The Historical Performance Trap: July's Losing Streak

Coterra Energy's track record in July isn't just underwhelming—it's catastrophic. Over the past decade, CTRA's total return is a paltry 28.52%, compared to the S&P 500's 252.82%. Even more damning: CTRA's annualized return of 2.52% trails the S&P 500's 13.32%, and its July performance is a recurring drag.

Take a closer look at July's monthly returns:
- In 2016, CTRA gained 5.16%, but that was an outlier.
- By 2023, July brought a -1.3% drop, and partial data for 2024 suggests stagnation.
- Meanwhile, the Energy Select Sector SPDR Fund (XLE) has lagged the S&P 500 for over a decade, with its 10-year return (62.9%) crushed by the broader market's 290.6%.

The lack of an economic moat and exposure to energy sector cycles amplifies CTRA's risks. With no sustainable competitive advantage, its fate hinges on oil prices—a volatile variable at best.

Technical Indicators: The Bearish Setup

Technical charts are flashing red for CTRA. Here's what the numbers say:
1. Declining Momentum: CTRA's 200-day moving average (DMA) has trended downward since early 2024, while its Relative Strength Index (RSI) hovers in oversold territory (below 30).
2. Resistance Breakdown: CTRA failed to hold above its 50-DMA in June 2025, a classic bearish signal.
3. Sector Drag: The XLE's 5-year negative return (-26.8%) underscores structural weakness.

The energy sector's 4.87% weight in the S&P 500—its lowest since 1990—signals waning investor confidence. Funds are fleeing to tech and healthcare, leaving oil stocks stranded.

Macroeconomic Headwinds: A Perfect Storm

Three forces are conspiring against energy stocks this July:

1. Geopolitical Tensions

Middle East conflicts and U.S.-China trade frictions could disrupt oil supply chains. While higher oil prices might seem bullish, prolonged instability often spooks equity markets, leading to sector-wide sell-offs.

2. Fed Rate Uncertainty

The Fed's pause-and-see approach keeps borrowing costs elevated. Companies like CTRA, burdened by debt (they're repaying $1B in term loans), face higher interest expenses.

3. Consumer Discretionary Drag

Rising oil prices eat into consumer spending power. The discretionary sector, already under pressure from inflation, could weaken further, depressing demand for energy-linked stocks.

The Investment Playbook: Pivot to Defensives

Investors holding CTRA or other energy equities should consider these moves:
1. Trim Exposure: Reduce CTRA holdings and rebalance portfolios toward energy-resilient stocks (e.g., renewable energy firms like NextEra Energy (NEE)).
2. Short the Sector: Use inverse ETFs like the ProShares UltraShort Oil & Gas (DSO) to profit from a downturn.
3. Go Defensive: Shift into utilities (e.g., NextEra Energy), healthcare (e.g., Johnson & Johnson (JNJ)), or gold miners (e.g., Newmont (NEM)), which thrive in volatile markets.

Conclusion: July's a Month for Caution

Coterra Energy's underperformance isn't a fluke—it's a pattern. With technicals broken, macro risks rising, and the energy sector's structural decline, July 2025 is shaping up as a lose-lose proposition for oil stocks. Investors would be wise to avoid chasing momentum in CTRA and pivot to sectors that offer stability. Energy's glory days may be over—until the next supercycle, stick to defensives.

Stay vigilant, stay profitable.