When the S&P 500 collapsed earlier this year, the energy sector took the brunt of the damage.
Investors knew that a global economic lockdown meant airlines wouldn’t be buying as much fuel because business travelers and tourists wouldn’t be flying, and they knew commuters wouldn’t be buying as much gas because they wouldn’t be commuting.
This sent energy prices into a tailspin, with crude oil futures actually dropping below $0 for the first time in history.
Well, after months of hoping more and more travelers might start flying and commuters might start commuting, investors appear to be throwing in the towel.
Letting Prices Slip
After rallying all summer, crude oil has not only broken down through its former up-trending support level but also retested that same level to confirm that it will now be serving as a new resistance level.
Daily Chart of Crude Oil Futures (CL1!) — Chart Source: TradingView
Crude oil isn’t the only part of the energy sector that’s being hit. Natural gas prices are also dropping back down toward their spring lows after a brief rally in August.
Daily Chart of Natural Gas Futures (NG) — Chart Source: TradingView
To take advantage of these bearish moves in the energy sector, we’re looking for stocks to short.
Hess Corporation (NYSE:HES) is an energy exploration and production company. It has operations all over the world working to produce both crude oil and natural gas. Unfortunately, this global diversification isn’t enough to combat a global pullback in consumption and falling prices in both commodities.
Why Hess Corporation?
HES broke through key support at $44 two weeks ago. After consolidating for six days, the stock has now completed a bearish flag continuation pattern by breaking down through its up-trending support level.
Daily Chart of Hess Corporation (HES) — Chart Source: TradingView
HES is now approaching its next support level at $40. We anticipate the stock will break through this support level in the short-term and drop down to its next support level at $32. If the S&P 500 continues to drop, we wouldn’t be surprised to see HES ultimately fall back down to its 52-week low of $26.06.
By shorting shares of HES now, you can set yourself up to profit from its eventual collapse.
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.