2 Commodity Stocks to Buy on the Dip: CF, MT

Major equity indexes have managed to claw their way back up to where they were prior to the broad-based correction seen on Wall Street at the end of last month. In fact, the NASDAQ-100 has even managed to post fresh highs, whereas the Dow Jones Industrial Average still has room to run before it hits previous resistance levels. Amid the bullish price action, however, economic data remains suppressed by the harsh weather conditions at home, which have dragged on retail sales as well as the labor market recovery [for more commodity futures news and analysis subscribe to our free newsletter].

Given the recent rebound in the stock market, many are using this opportunity to favorably position themselves as the bull train resumes its course. 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 $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].

CF Industries (CF)

Consider CF’s one-year daily performance chart below.


Click to Enlarge

This stock has been aggressively charging higher since carving out a double-bottom at $170 a share at the start of July in 2013. Since then, shares of CF have advanced higher along a steeply-sloping support line (red); bearish pressures surfaced in mid-January however, and since then this stock has been looking to regain its footing. What’s encouraging is that CF has previously rebounded off current levels; notice how shares have managed to bounce off $220 (blue line) on a number of occasions over the last few months. If CF holds above support in the coming days, traders are encouraged to enter long in anticipation of a rebound.

ArcelorMittal (MT)

Consider MT’s one-year daily performance chart below.


Click to Enlarge

This stock boasts a very similar technical pattern to that of the chart profiled directly before. MT has been charging higher along a steeply-sloping support line (red) since carving out a double-bottom around $11 a share in early July last year. Similar to CF, this stock has also experienced a correction recently that has brought it down to a support level (blue line), which it has previously managed to rebound off on numerous occasions. If MT can hold its ground above $16 a share in the coming days, then traders might want to enter a long position anticipation of another rebound for the stock.

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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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