This bull is still raging. Major equity indexes continue to drift higher following the Fed’s decision last week to hold off from scaling back bond-repurchases. Although bullish forces have prevailed since this decision, it’s clear that market participants were disappointed with the fact that the Fed’s policy statement made no mention of the government shutdown as evidenced by the negative, volatile performance on 10/30/2013; this has led many to believe that because the Fed made no mention of the shutdown, it is signaling that it will proceed with the taper at the next meeting [for more commodity futures news and analysis subscribe to our free newsletter].
With the holiday shopping season upon us and no clear headwinds in sight until the debt-ceiling debate is reopened on January 15, 2014, many have been positioning themselves in anticipation of a strong year-end rally. As such, below we take a look at two commodity stocks that are trending higher, but have slipped in the last few trading sessions, 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 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].
Cabot Oil & Gas (COG)
Consider COG’s one-year daily performance chart below.
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COG has come down to its 200-day moving average over the last week, grinding along the same level of support that it has managed to hold above on a handful of occasions this year alone; notice how this stock has been able to rebound off $34 (red line) a share several times, most recently in mid-July before proceeding to post all-time highs. This stock does have major support at current levels; however, it may trade as low as the next support level at $32 a share before resuming its longer-term uptrend.
Dow Chemical (DOW)
Consider DOW’s one-year daily performance chart below.
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DOW has been correcting lower over the past two weeks following its steep run-up at the beginning of October. This stock may find a near-term bottom at current levels (red line) considering that it managed to rebound off $38 a share at the start of last month. If DOW breaks below $38 a share, it’s probable that the stock will look to find more stable footing in the $36-$34 range, which falls in line with its 200-day moving average.
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Disclosure: No positions at time of writing
