If you’re a fan of speculation, PHX Minerals (NYSE:PHX) should be on your radar. Here, we’re not dealing with complex options-related nuances. We’re dealing with simple economic equations and a straight buy of PHX stock in the open market.
According to the company’s public profile, PHX Minerals operates as a natural gas and oil mineral enterprise. It produces and sells natural gas, crude oil and natural gas liquids (NGLs). As an upstream player, it commands inherent relevance. After all, the world continues to run on oil. And current geopolitical dynamics enhance this narrative.
Front and center right now is the conflict in the Middle East. Tensions flared recently when Iran and Israel launched missile attacks against each other. If things escalate further, the risk of global oil supply chain disruption is on the table.
Plus, Ukraine has been striking Russian oil refineries and factories in a bid to stem its invasion. These attacks will likely continue, given that both the House of Representatives and Senate approved aid for Ukraine.
Reduced supply, higher demand. That’s bullish for PHX stock.
Compelling Technical Chart Signals Big Upside
That was the fundamental argument. Now, let’s get into the technical side, which involves reading the tea leaves of market sentiment.
My go-to source for anything related to chart pattern interpretation is John J. Murphy, author of the book, Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications. It’s really the bible of the technical approach.
Murphy discusses the formation of the bullish pennant. This pattern breaks down into three phases. First, a surge of bullish sentiment drives up the price of the target security, creating a “flagpole.” Second, a consolidation pattern emerges where bulls and bears negotiate the price down to a narrow focal point. Third, the price breaks out.
According to Murphy, the move after the pennant is completed should match the size of the move preceding it. Roughly speaking, for PHX stock, the return between the March 21 and April 5 sessions was 14%. So, PHX could potentially rise to $3.80 or possibly more.
Trade of the Day: Buy PHX Stock in the Open Market
Sometimes, it’s nice to keep things simple. So, here’s the trade of the day: Buy PHX stock when the market opens on Wednesday. However, there are some easy nuances to keep in mind.
First, it may be better to gradually build your position. By my eyeballs, it appears that PHX stock is in the final third of forming its pennant. Therefore, some choppiness can materialize before the possible breakout move begins.
Second, another reason why there could be time to build this position is that PHX is scheduled to announce its first-quarter results on May 8. A combination of geopolitics along with the prospect of a solid result and/or optimistic outlook may send PHX stock higher.
Third, this could be a long-term idea in addition to short-term speculation. Notice that in October 2020, PHX stock traded hands at around $1.50. While volatile, it has gradually moved up to $3.33 as of Tuesday’s close. Again, the fundamentals could drive the narrative, making PHX very enticing.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
