U.S. oil prices have been trading in seesaw fashion throughout most of the week, with bears pushing crude into the low $32 per barrel price range. Recent government data now shows stockpiles of the precious commodity rising to more than 3.5 million barrels this past week, a new high on the verge of surpassing 510 million barrels.
Now, the Organization of Petroleum Exporting Countries, and other producers looking to put a lid on production, are planning to meet in March. The only problem has been that we’ve seen a lot of talk, but no action.
While the odds favor more downside in the near future, investors will keep a close eye on upper price resistance above $34. Should the Light Sweet Crude Oil Index break this upper barrier, there might be enough of a floor in place to switch bets. But for now, there is little evidence that the pieces are in place for bulls to establish any kind of lasting upside momentum.
For additional perspective beneath the grimey surface of the industry, our Profit Scannerscreening tool locates individual stock plays on the move, so you don’t have to cap your profit potential in an exchange-traded fund.
Using the Technical Event Screener’s advanced option, we can select any industries related to energy in some fashion. Oil and Gas — Exploration and Production is one such option. Selecting the “bearish” opportunity type yielded eight results vs. only two from the bullish side, confirming macro level events at play along with declining investor sentiment for the industry.
Assuming crude oil production meeting talks in March fall apart, we’ll continue to lean bearish. Here are three plays with technical pattern breakdowns that we’ve zeroed in on.
Consol Energy (CNX) has been on the slide for over a year now. And while shares have perked up now and then, the bulls have yet to really prove that a bottom has been in place. More recently, the stock traded in a symmetrical triangle continuation pattern, which in this case is bearish because, prior its price consolidation, the larger trend was down.
As you can see in the chart above, Profit Scanner does an excellent job marking any channels or technical patterns such as the one we discussed above. This opportunity showed up on the radar because price made a sharp move outside the symmetrical triangle formation, indicating that it’s a good time to short the stock in advance of more anticipated downside to come.
Profit Scanner also tells us a few key things. First, this should be viewed with an intermediate-term lens. In other words, it’s not a day trade, and it’s not something you want to hold on to forever. Second, we are given a most recent closing price and a target that, should the trade go our way, we’d look to take profits somewhere between $2.25 and $3.25. Lastly, we’re given a resistance price of $7.81, which is helpful in determining where to place a stop loss a bit further above to create some wiggle room for the stock and keep any positions in play.
In the above chart, we have a “flag” representing a brief pause for the stock to “catch its breath” before running in the same direction again. Similar to the CNX example on the previous page, these technical patterns are merely short-term countertrends that can either represent profit taking, stock rumors or typical investor behavior near points of support/resistance, etc.
With EGN, Profit Scanner tells us that although shares have closed near $24.83, we can play the downside in the hope that shares hit the price target range between $9 and $12 per share. For a short-term play, this could result in material gains sooner rather than later.
Using the “stops” section to the bottom right of the chart screen (not seen in the chart above),Profit Scanner tells us that in going short on the stock, we should place a protective stop loss, buying to cover the position at $29.57 should the trade go against us.
Dorchester Minerals (DMLP) is another intermediate-term play.
In the chart, we have another symmetrical triangle continuation pattern. With a recent closing price of $9.56 per share and a breakdown from this pattern, Profit Scanner is looking at a target price range between $8.10 and $8.40.
While this is probably the least profitable play when considering the target range proximity and expected time horizon for holding the trade, we can certainly appreciate opportunities for whatever the market throws at us.
In many cases, investors will incorrectly initiate trades within a pattern to get a better price, only to get burned when the price exits a formation against their position. Profit Scanner counters this in that the screener can confirm pattern breaks close to real-time whenever you do a new screener search.
Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.