The bulls have managed to keep the rebound on Wall Street afloat as major indexes haven’t looking back since the lows seen on October 15th. The surprise stimulus announcement from the Bank of Japan at the end of last month has served as a tailwind for global equity markets, not to mention all the talks about seasonality and the Santa Claus rally already taking root on the home front [for more commodity futures news and analysis subscribe to our free newsletter].
Despite the ongoing rebound on Wall Street, commodity-focused stocks, namely energy-related stocks, are still lagging behind as crude oil prices continue to struggle in finding a bottom. As such, below we take a look at commodity stocks that have been enjoying stellar uptrends, but are still playing catch-up in relation to the broad market, 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 50-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].
Enterprise Product Partners (EPD)
Consider EPD’s one-year daily performance chart below:
This stock had been enjoying an impressive uptrend for the past year until recently encountering stiff resistance at the $41 level; since peaking in early September, EPD has endured a deep pullback. More recently, it appears that this stock has regained its footing and might be returning to its longer-term uptrend, as evidenced by the fact that it has settled back above its 200-day moving average (yellow line). Furthermore, EPD has previously rebounded off support around $36.50 a share (red line) as seen in mid-June and early August. For those jumping into a long position in anticipation of a continued rebound, be sure to utilize a stop-loss around recent lows above $36 a share.
TransCanada Corp (TRP)
Consider TRP’s one-year daily performance chart below.
This stock had been enjoying a fairly steep uptrend (blue line) since finding a bottom in late January of this year. TRP did run into some stiff resistance around $56 a share, and after failing to conquer it, the stock proceeded to endure a steep decline until finding a bottom in mid-October alongside major equity indexes. Since then, TRP has staged an impressive rebound as evidenced by the fact that it has regained its footing above the 200-day moving average (yellow line). Given the longer-term trend at hand here, we feel that TRP is positioned to continue higher; for anyone jumping in long, be sure to utilize a stop-loss around $47 a share in case profit taking pressures re-emerge.
Disclosure: No positions at time of writing