Long-Term Trend Reversal Alert For Apache Corp. (APA)

Stock markets remain under bearish pressures this week as investors are still on edge about the Fed’s recent discussion of scaling back on bond-repurchases. At this point, sentiment is quite unclear and volatility levels remain elevated because any upbeat economic data can be interpreted as a sign that the Fed will in fact taper ongoing stimulus measures sooner-than-expected; likewise, any lackluster data releases are also a reason to lock-in profits seeing as how the S&P 500 Index is still sitting on hefty gains upwards of 10% year-to-date [for more commodity futures news and analysis subscribe to our free newsletter].

The recent sell-off is a blessing in disguise for many eager investors who have been patiently waiting on the sidelines for an attractive entry point in hopes of jumping aboard the bull train. As such, below we take a closer look at a beat down U.S. energy stock that offers a lucrative buying opportunity for those with a stomach for risk and a longer-term investment horizon.

Chart Analysis

Consider Apache Corp’s (APA) three-year daily performance chart below. The Houston-based energy company has been stuck in a dismal downtrend over the past few years as made apparent by its lower-highs and lower-lows; this stock has also been fairly consistently trending below its 200-day moving average (yellow line), managing to retest this line of support on several occasions only to fail and continue sinking. What’s noteworthy this time around is that APA actually appears to be stabilizing above its 200-day moving average.

Click to Enlarge

Notice how this stock’s 20-day (red line) and 50-day (blue line) moving averages are both trending higher, while the security price itself has broken above the 200-day line as well; this suggests that short-term and medium-term momentum is turning bullish, while the longer-term gauge still needs to be confirmed, seeing as how APA has previously had false breakouts above its 200-day, as seen in February of 2012 [see 5 Commodity Trading Mistakes You Could Be Making].


Establishing a long position in APA at the moment is attractive given the lucrative upside potential and the opportunity to closely manage downside, as shares are trading near historical lows. Despite crossing above their 200-day moving average, shares of APA are still susceptive to a steep sell-off given the longer-term downtrend at hand combined with the clouds of uncertainty looming over the broad equity market. In terms of downside, this stock has major support around the $80 level, while profit-taking pressures may resurface as it nears resistance around $87.50 a share. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

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Disclosure: No positions at time of writing

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Commodity HQ is not an investment advisor, and any content published by Commodity HQ does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities or investment assets. Read the full disclaimer here.

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