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We are opening a new bearish trade on Noble Energy, Inc. (NYSE:NBL). As the price of crude oil and natural gas have plummeted from their 2018 highs, NBL has been struggling, along with the rest of the stocks in the Independent Oil & Gas industry group, to regain its footing.
Oil and Natural Gas Staying Low
Crude oil bounced up off of its $42.36 per barrel low in December, but most analysts believe it is going to remain below $60 per barrel for the foreseeable future.
Daily Chart of Crude Oil Futures — Chart Source: TradingView
Natural gas hasn’t done as well with its recovery in 2019. It is still trading below $3 per million British thermal units (MMBtu), and with winter almost over, demand isn’t likely to be as high.
Daily Chart of Natural Gas Futures — Chart Source: TradingView
If we were operating in a market environment where everyone was unquestioningly bullish, it wouldn’t be such an insurmountable problem to see energy prices pulling back. But because everyone on Wall Street is hyper-concerned with revenue and earnings growth rates at the moment, NBL is having a difficult time justifying a higher stock price.
It’s tough to boost growth rates when your margins are getting squeezed because you can’t demand higher prices for the products you sell — crude oil and natural gas.
NBL Could Break Below Key Support
After hitting resistance at $24 for the past few months, NBL broke below the up-trending support level that has been interacting with the stock. We are looking for the stock to initially drop to support at $20 — NBL’s early February low — before ultimately retesting its 52-week low just below $18.
If the stock market in general starts to turn lower, NBL may even go on to establish a new 52-week low.
Daily Chart of Noble Energy, Inc. (NBL) — Chart Source: TradingView
We recommend shorting the stock to take advantage of the general weakness in the Independent Oil & Gas industry group.
To find out what level we recommend selling NBL stock at — and to get access to our full portfolio of income-generating trades — consider signing up for risk-free trial subscription to Strategic Trader today.
InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of Strategic Trader.
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