Traders looking for exposure to the natural gas space should take a good look at Apache Corporation (NYSE:APA). The Houston-based exploration and production company has chart watchers starting to salivate. And who can blame them? The APA stock chart is a thing of beauty.
Let’s break it down.
For the big picture we begin with a three-year weekly chart. Longer-term charts provide a birds-eye view of trends that may not be apparent to traders toiling on the daily chart.
Like most stocks, APA stock turned a corner in early 2015 and has been trending higher ever since. The ongoing ascent has been sufficient in reversing the 20-week and 50-week moving averages higher.
The past two months of profit-taking have returned Apache Corporation to a trendline that has halted all recent sell-offs. Watch for this level to provide support moving forward.
Turning to the daily chart reveals a more detailed view of the recent retreat. Since peaking at $69 in mid-December, APA stock dropped 12.3% before finally popping this week. The mild correction has taken on the form of a falling wedge pattern that is on the verge of breaking topside.
A breach of the upper trendline is as good a trigger as any for traders looking to get in on the action.
Volume patterns have also been bolstering the bulls of late. Over the past three days we’ve seen high volume accompanying the rally. Accumulation typically bodes well for a stock moving forward.
The APA Stock Option Trade
The low-volatility fog settling across the land has brought APA option prices down. With an implied volatility rank of 1%, they are about as cheap as they’ve been all year.
If APA can rise above $63, consider buying the April $62.50 calls for around $3.40. The risk is limited to the initial $3.40 and will be lost if Apache shares sit below $62.50 at expiration. To minimize the damage, you could exit if the stock falls below the 200-day moving average at $58.
On the profit front, you needn’t worry. The long call offers unlimited reward, so pull out the pom-poms and start rooting for a rip higher.
At the time of this writing, Tyler Craig had no positions on any of the aforementioned securities.
