Major equity indexes climbed higher last week week and kicked this week off on strong footing thanks to upbeat new home sales data and a lack of “bad surprises” from the latest FOMC minutes release. Overseas, tensions between Ukraine and Russia are heating up again following presidential elections as well as a firefight over Donetsk airport [for more commodity futures news and analysis subscribe to our free newsletter].
The rebound seen since the April 2014 lows is encouraging, especially when we consider the S&P 500 Index breaking and settling above the coveted 1,900 level. Given the ongoing bull trend and with earnings season behind us, many are using any dips along the way to favorably position themselves as the uptrend gains momentum. As such, below we take a look at two commodity stocks that are trending higher, but are still lagging behind broad-based equity benchmarks, thereby offering an attractive opportunity to “buy on the dip” in the near future.
The stocks included here are rated as “buy” candidates for three reasons: First and foremost, each of these companies boasts a market cap upwards of $1 billion along with average daily trading volumes topping the 1 million mark, in an effort to weed out smaller, more volatile, trading prospects. Second, these securities are trading above their 200-day moving averages, thereby implying they are in longer-term uptrends. Thirdly, these stocks are also trading below their five-day moving averages, which makes them attractive for swing traders looking to buy in before they rebound. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques [see 5 Commodity Trading Mistakes You Could Be Making].
Consider CVX’s one-year daily performance chart below:
This stock has been charging higher along a steeply rising support line (blue) since shares bottomed out just below the $110 level. CVX has managed to pierce through its 200-day moving average (yellow line), which is quite encouraging given its sideways price action in the second half of 2013. With CVX nearing the same trend line that it has recently managed to rebound off, we’re keeping a close watch on this stock; nonetheless, investors must exercise caution at these levels, seeing as how CVX has failed to settle above $126 a share (red line) on four occasions since peaking at $127.83 a share on 7/25/2013.
Valero Energy (VLO)
Consider VLO’s one-year daily performance chart below.
This stock has been steadily charging higher within a fairly steep, upward-sloping channel (blue lines) since re-conquering its 200-day moving average (yellow line) in early November of 2013. VLO has managed to stay within this same trading channel thus far in 2014; with the stock now nearing its lower support boundary, traders may wish to jump into a long position given the opportunity to favorably position themselves for a continuation of the uptrend while still keeping a close watch on downside risk. Please note that a close below $52 a share would call for reassessment of the uptrend at hand.
Disclosure: No positions at time of writing