The sharp rebound seen in the second half of October wasn’t enough to keep the bulls at bay during the month of November. Buyers remain in control on Wall Street as evidenced by the continued ascent among major equity benchmarks; the key tailwind here has been supportive central bank policies. Now that the ECB and the People’s Bank of China have joined the Bank of Japan in promoting economic growth through loose monetary policy, investors can rest assured that policymakers are likely to provide additional support as needed [for more commodity futures news and analysis subscribe to our free newsletter].
Energy stocks have not participated in the ongoing rebound for the most part thanks to looming pressures stemming from suppressed crude oil prices. The situation only got worse for the energy sector on the last trading day of November after OPEC announced its decision to refrain from cutting production in light of plunging oil prices; not surprisingly, this piece of news sent energy-related securities sharply lower. As such, below we take a look at commodity stocks that have been enjoying stellar uptrends, but are still playing catch-up in relation to the broad market, 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 $10 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 50-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].
Energy Transfer Equity L.P. (ETE)
Consider ETE’s one-year daily performance chart below:
This stock has been enjoying a strong uptrend all year until encountering headwinds in October; since then, ETE has managed to regain its footing, as evidenced by the stock rising back above its 200-day moving average (yellow line). However, the recent OPEC announcement knocked ETE lower in a matter of days; what’s encouraging here is that the stock appears to have found support around $55 a share (red line), which is the same level that it has previously managed to rebound from. For anyone looking to take advantage of the potential rebound at hand, please be sure to utilize a stop-loss around recent lows near $55 a share in case bearish pressures return.
Magellan Midstream Partners (MMP)
Consider MMP’s one-year daily performance chart below.
This stock has been enjoying a strong uptrend all year until encountering headwinds in October along with the rest of the energy sector. Since then, MMP has managed to regain its footing above the 200-day moving average (yellow line). Recently, however, OPEC’s decision to keep production levels unchanged sent a wave of fearful profit taking across the entire energy sector, and MMP was not immune. What’s encouraging here is that the stock appears to have found support around $80 a share (red line), which is the same support level that it managed to rebound off on several occasions earlier in the year. For those looking to favorably position themselves in anticipation of a continued rebound, please utilize a stop-loss near recent lows around $78 a share in case bearish pressures emerge once again.
Disclosure: No positions at time of writing.