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We are not going to read into the Japanese Tankan Survey too much, for they have been bearish for so long being bullish is foreign to them. It is also probably just habit as we are reminded of a quote along the lines of "nobody ever got fired for buying IBM (IBM) hardware." Bucking the trend is never the safe move and when for years it has paid to be bearish when it seems everything is getting bullish, then it is easy to see why we are still getting negative readings there.

Why is that important? Well that news might lead commodity investors to think that a recovery in Japan shall be harder to manufacture or that it is not taking place at all. If confidence is not going up, one would find it difficult to see those same individuals increasing purchases of goods. But the Chinese numbers last night were strong, so we might see a canceling out of sorts between the data, especially with Europe closed. And that right there might be the best news we have to report to you today!

Commodity prices this morning are as follows:

  • Gold: $1598.00/ounce, up by $2.30/ounce
  • Silver: $28.01/ounce, down by $0.313/ounce
  • Oil: $96.68/barrel, down by $0.55/barrel
  • RBOB Gas: $3.1008/gallon, down by $0.0098/gallon
  • Natural Gas: $3.986/MMbtu, down by $0.038/MMbtu

Chart of the Day

The new all-time high in the S&P 500 Index is not directly commodity related, but most certainly market related and by extension commodity related and thus of interest to us this morning. Adjusted for inflation we are still not close to all-time highs, but we do expect markets to continue to rise, so those adjusted numbers might very well be met, and with that many talking heads would be disappointed.


(Click to enlarge)

Chart courtesy of Yahoo Finance.

Oil & Natural Gas

Diamondback Energy (FANG) continues its hot streak and maybe it is time for us to simply embrace the 10% pullbacks and view them as buying opportunities rather than waiting for the 20% pullback we have been looking for. The reason being is quite simple, for each 10% pullback it seems the stock is able to regroup and move up to take out previous highs. Investors saw another strong move by Diamondback on Thursday as the shares broke through the $26/share level and hit a new 52-week and all-time high of $27.21/share during the session. We like Permian assets and we like Diamondback's portfolio, so we are going to say this morning that on pullbacks of 10% readers can be buyers (looking at the $25/share area and just below for entry points).

If one is not bullish of energy right now, as it pertains to oil and natural gas, then you might want to rethink that because Cheniere Energy (LNG) continues to power higher and set another new 52-week high on Thursday. The shares even managed to close at $28/share, holding that valuable ground and providing one of those nice psychological boosts. We would not be so bullish if it were not for the data telling us to be so, and every time we have moved to position ourselves opposite our indicators expecting something to change, it has not. Thus we continue to view the trend as our friend and are investing accordingly. It was an ugly day for some of our E&Ps on Thursday, yet we were green here and that speaks volumes. This needs to be on everyone's watch lists simply for the guidance and directional trading patterns it can lead you to.

In trying to decide whether to use the 3-month or the 6-month chart, we realized that it did not much matter ... it is essentially the exact same chart! Regardless, it is still telling us to be bullish.


(Click to enlarge)

Chart courtesy of Yahoo Finance.

Uranium

The entire uranium sector has not heated up, and in fact has cooled just as we expected. The one outlier though? Yes that would be UR-Energy (URG) which has shown an ability to remain above the $0.90/share level for far longer than we believed. We wanted to be buyers in the $0.70-0.80/share range, but the share price action was abysmal and when we did come around the trade had moved too far against us. It is the trade we saw and it is disappointing, however we still believe that a pullback will happen before year-end. There is still good news to come, but the summer doldrums remain and so too does the litigation which needs to be resolved (which we believe will be).

A total miss on our part, but looking for a pullback, however the stock does have some support before it would reach our buying area.


(Click to enlarge)

Chart courtesy of Yahoo Finance.

Possible Trades:

We have been getting some requests of how we think the market should be played right now, and truth be told it is quite carefully. Long-term investments need to be made where there is either safe yield which is still respectable or value in the shares (and by value we do not mean one is to purchase a spec play because it could be worth $10/share instead of the current $1 if everything goes according to plan).

The market right now is respectful of those who have already put their long-term money to work months ago, so new money faces additional risk. Thus we think that currently we are in a bit of a trader's/stock picker's market. Currently we like:

SandRidge Energy (SD) any pullback from currently levels, and especially below the $5/share level would be bullish in our eyes. We want to not be buyers for long-term, but to play the bounces. By at support and not during a free-fall, and if possible buy on the upswing...that is something which we have found works best when trading this one.

Kodiak Oil & Gas (KOG) has always been a great trading vehicle around support levels. The company has liquidity but is small enough to be able to post nice day-to-day gains when oil or the market get moving. We told readers that this one was poised to move a few days ago and it did bounce from the $9/share level by about 4%. With shares back down to $9.09/share we would still be looking for another move but if shares break lower and move below the $8.80/share mark, then it is no longer a bullish story, but a situation where we would have to go on bear watch.

For our long-term and more conservative readers, be on the lookout for a pullback in Rosetta Resources (ROSE) and if shares fall into the $45/share area look to set up a position for a run back to $50/share. Do not use up all of your firepower at $45/share however, keep some back in case we get another step lower like the last time we did this trade into the $42-43/share range. This is a solid company and with their Eagle Ford and now Permian exposure we are comfortable owning this for a longer-term trade.

Setting up for another $45 to $50 run?


(Click to enlarge)

Chart courtesy of Yahoo Finance.

Source: 6 Commodity Stocks Moving On News