Interesting Short-Term Trade Setup in Oils


If you occasionally make small, very speculative trades based on just technicals (I sometimes do that just to keep myself entertained – certainly not with any significant amount of funds), some oil stocks are offering an interesting trade setup. And the fact that several in the same sector are in similar setups raises the odds, slightly, that a quick in-and-out trade may work.

Anadarko Petroleum Corp (APC) is a good example. Since late December, APC has cycled up and down twice, forming a well-defined upward-sloping channel. The width of the cycles, as judged by the cycle lows and the stochastics indicator, are equal. Not a large sample of events, but regularity, especially when a stock is trying to work off recent lows, often leads to higher probability trades. With APC, there is a pretty good chance that the stock will rebound over the next few weeks and head towards the top of the channel. It is less likely APC will break down through the bottom of the channel.

Maybe you can't set up a 2.5 or 3-to-1 reward-to-risk trade, but with good trade management, and considering the probabilities are in favor of an up-move, someone looking for a little ‘action at the tables' might be interested. Baker Hughes (BHI), Devon Energy (DVN), and several other oil stocks appear to be ready to bounce off cycle lows.

Of course, the fundamentals of most of these, heck, all of them, are lousy right now. And this is a quiet period of the year, so I can't point to a strong seasonal pattern right now on any of these to help justify a trade. But I did find one oil stock that looked better than the rest, relatively. A couple of top insiders (CEO and a Director) recently bought a total of $4.5 million of the stock.

The company is Hess Corp (HES). HES is trying to rebound off a possible cycle low, as the stochastics indicator confirms. The 50-day Moving Average is starting to work upwards. It is more likely HES will head upwards towards the 80 level than to break below the uptrend and head to the 65 level.

So if someone entered a HES position at the current 69, intending to sell on a stop-loss if HES hits 66.5 (-3.7%), and aims to close the trade if HES hits 80 (+15.9%), then the reward-to-risk for this trade would actually be a nice 4.4-to-1.

And if conditions improve, HES may be a good oil stock to keep as a longer term investment (They paid $0.40 dividends in 2010 and 2011, $0.50 in 2012, $0.70 in 2013, and $1.00 in 2014. By reinvesting dividends, this could be a nice long-term stock if fundamentals improve and dividends keep growing).

Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, please click on the following link: www.markettamer.com/seasonal

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2015 Stock & Options Training LLC

Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.

Gregg Harris is the Chief Technical Strategist at MarketTamer.com.

The content on any of Market Tamer websites, products, or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options, and other securities involve risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities are not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options (http://www.optionsclearing.com/publications/risks/riskstoc.pdf). The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.

 

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