Trade of the Day: Basic Energy Services (BAS)

There’s no doubt domestic energy names have been buzzing with increased concern in the Middle East and the U.S. goal of energy independence. Against this backdrop, Profit Scanner powered by Recognia found a Texas-based oil and natural gas producer that looks good for 17% to 20% upside before the winter cold settles in: Basic Energy Services (BAS).

At the July 16 close, Basic Energy’s chart showed that a bullish Continuation Diamond formed, setting the stock up for an intermediate-term run.  Basic Energy closed Wednesday’s session at $28.74, but the bullish Continuation Diamond carries a target of $33.75 – $34.75.

The pattern is expected to play out in approximately 90 trading days, so if the technical analysis is confirmed, Basic Energy could reach a new 52-week high before the year is out. (Basic Energy’s all-time high is $37.79, which it hit in July 2011.)

Resistance for Basic Energy stock lies at $28.88, so traders may wish to see the stock close above that level before establishing positions. There is support at $26.05 but Profit Scanner has pinned a conservative stop loss slightly above that at $26.27.

Basic Energy does have an option chain that offers an October and a January 2015 series, but open interest is relatively low. While Profit Scanner does not make recommendations for options trades, a basic tenet of options trading is to try and stick with positions that have ample liquidity – especially in the lighter-volume trading of the summer. Traders may be further ahead to simply trade the stock, as average daily volume for Basic Energy is typically better than a million shares.

BasicEnergy

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Article printed from InvestorPlace Media, https://investorplace.com/2014/07/trade-day-basic-energy-services-bas/.

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