Today, we’ll look at three companies in the oil and gas exploration and production industry — these low-priced energy stocks were hammered at the tail end of 2014 and throughout most of 2015.
More recently, related stocks in the industry have perked up thanks to a surprising agreement struck in late September among OPEC members to reduce output.
This announcement marks the first time in roughly eight years that OPEC has stepped in to manage production. The only question is whether or not OPEC can deliver on its goal of reducing global production levels by 1%.
As shares of energy companies we’ll discuss in this article begin to accelerate off their respective price bottoms, we’ll deploy Profit Scanner powered by Recognia in an effort to determine each stock’s profit potential and help take some of the guesswork out of your exit strategy.
Boosted Energy Stocks: Denbury Resources (DNR)
Denbury Resources Inc. (NYSE:DNR) is an oil and natural gas company with properties that have oil and natural gas reserves of over 288.6 million barrels of oil equivalent in the Gulf Coast and Rocky Mountain areas in the United States.
In the longer-term chart above, you’ll see that DNR has been decimated by a reduction in oil and gas revenues attributed to falling commodities prices and lowered levels of production.
The good news for investors long the stock is that the bleeding appears to have stopped and, while there’s plenty of supply in existence, prices have come down to the point where analysts believe a complex price floor is forming as a result of market saturation.
Profit Scanner latched onto a “Bottom Triangle” price formation breakout (outlined in red), which is a bullish signal that marks a possible reversal of the current downtrend. This technical pattern has two converging trendlines and will display two highs touching the upper trendline with two lows touching the lower trendline. The pattern is confirmed when price breaks upward out of the Bottom Triangle formation to close above the upper trendline, and that’s exactly what we have with DNR.
Due to the fairly long duration of the pattern itself, the system is looking for big gains on this one, with a conservative price target of $5.80. DNR shares are currently trading at $3.16, so investors could see gains of up to 83.5% on the underlying stock alone.
Boosted Energy Stocks: MV Oil Trust (MVO)
MV Oil Trust (NYSE:MVO) is a statutory trust whose oil and gas properties include about 1,000 producing oil and gas wells.
The chart above shares a similar story as DNR; hinting that poor price performance over the past few years has been more a reflection of the commodities environment rather than underlying issues attributed to the company itself.
Profit Scanner recognized a bullish breakout from MVO’s “Bottom Triangle” pattern on Oct. 3 when the stock closed at $5.80 per share. With an $8.10 price target, investors who took action based on the event signal stand to capture gains of up to 39.7%.
While this is a longer-term bullish outlook, MVO is breaking out and has the historical potential to reach its target within a shortened time horizon.
Boosted Energy Stocks: Sanchez Energy (SN)
Sanchez Energy Corp (NYSE:SN) is an oil and natural gas exploration and production company with efforts in the United States Gulf Coast region — Eagle Ford Shale (Texas) and Tuscaloosa Marine Shale (Mississippi and Louisiana).
In the chart of SN stock above, we’ve got another déjà vu occurrence between these energy stocks. It’s the same breakout story with the same “Bottom Triangle” technical pattern. The only thing that’s different is the profit target potential.
On Oct. 3, Profit Scanner provided investors with the bullish event described above as SN closed at $9.03 per share. Now that the breakout is underway, SN’s price target has been set at $15.50, which represents a 77.3% price appreciation opportunity for those who didn’t hesitate to act.
If, for any reason, the price does show weakness in the short term, be sure to keep an eye on the $8 support level below.
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.