It’s been a rough ride lately for energy stocks, which took yet another hit after Organization of the Petroleum Exporting Countries (OPEC) confirmed on Nov. 27 that, indeed, the oil cartel has no plans to cut production and bid up global crude-oil prices.
Lower fuel costs may be a boon to the economy as a whole, but cheap oil is creating some ugly charts in the energy sector…and the Profit Scanner powered by Recognia has identified several oil-and-gas companies that are looking ideal for a bearish trade.
In the past couple of days, four such stocks have suffered a bearish Triple Moving Average Crossover. Moving averages are commonly used in technical analysis to help discover an underlying trend — and when a shorter moving average crosses either above or below a longer moving average, it signals that the stock price is more likely to continue in that direction.
To interpret a specific crossover, your primary clue is in the time horizons of the different moving averages involved. The events Profit Scanner spotted this week were all four-day, nine-day and 18-day moving average crossovers; in other words, the four-day M.A. crossed below the nine-day M.A., which in turn crossed below the 18-day M.A. This implies that the stock is headed lower in the short term. (Similarly, a crossover of longer moving averages, such as the 200-day M.A., would be a longer-term bearish signal).
In this case, the stocks that are showing this four-day, nine-day and 18-day moving average crossover include:
- Cabot Oil & Gas Corporation (COG), an exploration and production (E&P) company based in Houston, Texas;
- Devon Energy Corp (DVN), an E&P company based in Oklahoma City but with operations in both the U.S. and Canada;
- Goodrich Petroleum Corporation (GDP), another E&P company based in Houston;
- Exco Resources Inc (XCO), a Dallas, Texas–based company that also focuses on E&P, primarily with shale resources.
Traders should keep in mind that moving averages are based on historical information, not up-to-the-minute pricing, and thus are best used in conjunction with other types of technical indicators. Happily, the Profit Scanner has identified several other bearish indicators for all four stocks within the last few days, including the momentum indicator (GDP), the MACD (GDP and XCO) and the short-term “Know Sure Thing” (COG, GDP and DVN).
For those looking for options opportunities, all four stocks have great option chains with lots of open interest and nice liquidity, which should make it easy to get in and out of the trade in a timely manner. Whether you decide to go with a put option or trade the stock(s) directly, the technical picture makes COG, DVN, GDP and XCO ideal candidates for bearish profits in the struggling energy space.
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.