Until recently, the thought of investing in an Indonesian energy business might not have crossed your mind. Yet, the buzz surrounding Indonesia Energy (NYSEAMERICAN:INDO) and the swift moves in INDO stock may have caught your attention.
When a stock makes triple-digit moves to the upside in a short period of time, contrarians will sometimes be tempted to bet on a retracement. Short-selling stocks with bullish momentum is a dangerous game to play, however.
At the very least, traders should learn about Indonesia Energy and consider the macro-level factors before taking a position in INDO stock. Otherwise, they could end up on the wrong side of the trade.
With that in mind, let’s delve into the basics of Indonesia Energy and see if we can get to the bottom of this wild share-price rally. In the final analysis, you’ll likely agree that the trend should be your friend, not your enemy.
INDO Stock at a Glance
The trend-is-your-friend principle definitely applies to INDO stock, as anyone who attempted to “fade the rip” learned a harsh lesson.
Indonesia Energy shares were worth around $2.85 apiece at the start of 2022. To be honest, Wall Street wasn’t paying much attention to this stock at that time. With a series of quick price moves, however, INDO start started to gain momentum while also capturing Wall Street’s attention. On Jan. 27, William White observed the stock catapulting more than 150% in a single day.
Then, on Feb. 22, Chris MacDonald noted that the Indonesia Energy share price had surged approximately 80%. Fast-forward to March 4, and the stock was up an additional 101.83% in a single trading session. That same day, Samuel O’Brient reported that INDO stock had gained roughly 500% in a short period of time. Amazingly, the stock reached $40 after having started the year below $3.
Along the way, you can be assured that some Indonesia Energy bears went into hibernation and at least a few short sellers were forced to cover their positions at a loss.
Why Ask Why?
During this major bull charge, the media seemingly struggled to make sense of it all. For example, an article from March 4 stated that Indonesia Energy’s “website didn’t list any press releases, securities filings or presentations from this week.”
Another article reported, “The move higher has occurred despite any company specific-news,” again highlighting the surprising nature of INDO stock’s rally.
Yet, informed investors must still ask why this happened. Even if the markets can be irrational sometimes, it’s not a great idea to get into a trade without understanding what’s happening.
According to Yahoo Finance, INDO stock’s trading volume on March 4 was a whopping 66,190,860, while the stock’s average daily trading volume was just 6,299,272. So clearly, something’s going on.
It’s All About Oil
Thankfully, O’Brient was able to stay calm and make sense of the trading community’s sudden fascination with Indonesia Energy. Just recently, the WTI (West Texas Intermediate) crude oil price settled at $115 per barrel. This was oil’s highest price since 2014.
O’Brient succinctly summed up the consequences of this oil-price spike: “As fears of an energy crisis generated by the Russia-Ukraine conflict sent prices shooting up, experts speculated as to just how high they could go. Oil stocks began rising in accordance, sending several small cap companies to new heights.”
Therefore, Indonesia Energy has been caught up in a wave of investor bullishness surrounding small oil explorers.
The company’s Indonesia-based assets include 1.05 million land acres, located primarily on the islands of Sumatra and Java. Apparently, long-side traders are betting that Indonesia Energy could become a competitive emerging-market oil producer.
The Takeaway
INDO stock is speculative, so please don’t mortgage your house and load up on the shares. On the other hand, the stock’s trajectory and momentum indicate that the share price could continue to move up quickly.
Indonesia Energy could, indeed, turn out to be a significant oil producer. If that happens, the company’s shares will likely continue to gain in value. As such, it’s fine to take a small position in INDO stock. Of course, we mean a long position, not a short position, as we still want to be a friend of the trend.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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