The bears have finally arrived on Wall Street. Much to the bulls’ frustration, selling pressures have managed to return with full force amid all-time highs for major equity indexes. Growing fears of an earlier-than-expected rate hike on the home front has prompted a market-wide sell off that doesn’t appear to be over just quite yet [for more commodity futures news and analysis subscribe to our free newsletter].
Adding to the laundry list of uncertainty are looming geopolitical tensions in Eastern Europe, as Russia continues to amass troops along its border with Ukraine. With the S&P 500 Index recently breaching the 1,950 level, many are bracing for more downside; the 1,900 level looks to offer the next area of support, followed by the 1,850 level, which also aligns closely with the benchmark’s 200-day moving average.
Despite the recent turmoil on Wall Street, the longer-term uptrend at hand is undeniable. As such, below we take a look at commodity stocks that have been enjoying stellar uptrends, but have also fallen prey to steep profit taking pressures in recent days, 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].
National Oilwell Varco (NOV)
Consider NOV’s one-year daily performance chart below:
Click to Enlarge
This stock has been chugging along a steep, upward-sloping trend line (blue) since stabilizing above its 200-day simple moving average (yellow) in late March of this year. NOV has pulled back considerably in recent days as the stock gave way to profit taking pressures amid the broad market sell-off. Despite its recent decline, however, NOV still appears to be in good shape; notice how the stock is attempting to rebound off the trend line that it has respected since its March lows. We advise taking a long position at current levels in anticipation of a rebound; we also advise utilizing a tight stop-loss in case bearish pressures turn out to be stronger than previously anticipated.
Energy Transfer Equity L.P. (ETE)
Consider ETE’s one-year daily performance chart below.
Click to Enlarge
This stock has been trading within a fairly well-defined channel (blue lines) since bottoming out in late September of 2013. Since then, ETE has managed to pull back upon nearing its upper resistance boundary; likewise, the stock has also managed to rebound upon nearing its lower support boundary. Given that ETE is currently nearing its lower support boundary, traders have an opportunity to favorably position themselves in anticipation of a rebound, all the while closely monitoring their downside risk. We advise utilizing a tight stop-loss around $52 a share in case ETE breaks below its channel, in which case the uptrend will need to be re-evaluated.
Don’t forget to subscribe to our free daily commodity investing newsletter and follow us on Twitter @CommodityHQ.
Disclosure: No positions at time of writing
