2 Commodity Stocks to Sell on the Next Pop: KMP, SLW

Much to the bears’ frustration, major U.S. equity indexes are refusing to make way for profit taking pressures even as earnings season continues full steam ahead. The S&P 500 Index continues to inch further into uncharted territory, although over the past two weeks it has failed to continue its impressive streak of posting new highs, leading many to speculate about what headwinds could spark the next steep correction on Wall Street [for more commodity futures news and analysis subscribe to our free newsletter].

Amid the ongoing bull market at home, many remain hesitant to jump in long ahead of the potential budget debate that could arise and spark a sell-off ahead of the February 7th debt-ceiling deadline. As such, below we highlight two commodity stocks that may offer an attractive short selling opportunity for those looking to bet against some of the stellar run-ups already seen across Wall Street.

The stocks included here are deemed to be great trading candidates for three reasons. First and foremost, each of these companies boasts a market cap upwards of $1 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 below their 200-day moving averages, thereby implying that they are in longer-term downtrends. Lastly, these stocks are also trading above their five-day moving averages, which makes them attractive for swing traders looking to sell short before they resume their downtrend. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques [see How To Lose Money Investing In Commodities].

Kinder Morgan Energy Partners (KMP)

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


Click to Enlarge

This stock has been stuck in a dismal downtrend, although not a very steep one, since peaking at $92.99 a share on 4/24/2013. Since then, KMP has managed to decline below its 200-day moving average while posting lower-lows and lower-highs along the way as evidenced by the crude red trading channel. Given that KMP is currently nearing the upper-half of its longer-term range, we feel that it may soon encounter resistance around $84 a share and proceed to correct lower as it has done so in the past.

Silver Wheaton (SLW)

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


Click to Enlarge

This stock has been rallying higher over the past month after carving out what appears to be a double-bottom relative to its lows of $17.75 a share set in late June of 2013. Despite the encouraging price action seen in recent weeks, we are not yet convinced that SLW is in fact staging a trend reversal; notice how this stock has previously failed to summit its 200-day moving average upon nearing it, as seen in late August, mid-September, and most recently late October of 2013. Traders looking for a short selling opportunity should keep an eye on SLW if it fails to settle above $24 a share, or gaps below $20 a share.

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Disclosure: No positions at time of writing

This entry was posted in MLPs, Silver, Trading and tagged , . Bookmark the permalink.

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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