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.
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