Much to the energy bulls’ growing frustration, crude oil prices have continued to plunge lower with no reversal in sight. Volatility in the energy market has spilled over onto Wall Street judging by the back-and-forth whiplashes seen during the first two weeks of the New Year.
While energy stocks have been at the epicenter of the ongoing sell-off in the oil market, other basic materials-related stocks have gotten hit as well amid the broad-market weakness seen in recent trading sessions. As such, below we take a look at two commodity stocks that have been enjoying strong 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.
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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
This stock has been enjoying a solid uptrend (red line) over the past year. Notice how shares of AA have managed to climb higher after nearing their 200-day moving average (yellow line) on two occasions during 2014; more recently, this stock came below its 200-day moving average, and as expected, it managed to quickly settle back above it. Now that AA is back above this trend line, but still showing signs of weakness, we view this as a great buying opportunity in anticipation of the longer-term uptrend resuming its course over the coming weeks.
Be sure to utilize a tight stop-loss above $14 a share in case steeper profit taking pressures begin to develop.
Monsanto Company (MON)
This stock has been trading along an upward sloping trendline (red line) for the past year. Aside from the correction seen in September-October of 2014, shares of MON have managed to rebound off their 200-day moving average (yellow line) upon nearing it, as seen on several other occasions last year. With MON recently dipping back down to its 200-day moving average, we view this as an attractive buying opportunity in anticipation of its longer-term uptrend resuming course over the coming weeks.
Be sure to utilize a tight stop-loss near recent lows around $115 a share in case another round of selling hits this stock.
Disclosure: No positions at time of writing.