5 Commodity Stocks Moving On News

 |  Includes: ABX, CLF, FANG, LINE, XOM
by: Matthew Smith

This morning, stock markets across the world are green but commodities are showing red, which is a breakdown of how Friday's session went. Maybe it is time for a breather, but we want to see if we get a bounce during the day where should we open up red we see green, and if we open up green we end up even higher. It has been a trend we have noticed among the market leaders for quite some time now, and if the general market begins to perform that way then we could see a really strong move higher, which would decimate the bears. Something similar to a semi-truck taking out flies on the freeway.

Commodity prices this morning are as follows:

  • Gold: $1458.80/ounce, down by $9.20/ounce
  • Silver: $23.625/ounce, down by $0.33/ounce
  • Oil: $95.61/barrel, down by $0.55/barrel
  • RBOB Gas: $2.8513/gallon, down by $0.0144/gallon
  • Natural Gas: $3.984/MMbtu, down by $0.027/MMbtu

Chart of the Day

We are now right around the all important $4/MMbtu level. If support does not kick in soon, we could see a retracement all the way back down to $3.80/MMbtu as a best-case scenario and possibly even the $3.40-3.60 range if it gets ugly.

Click to enlarge images.

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Chart courtesy of CNBC.com.

Oil and Natural Gas

Yesterday saw shares of Diamondback Energy (NASDAQ:FANG) hit new highs and finished the day at $28.76/share after rising $1.28 (4.66%) on volume of 396.8k. Investors should watch for earnings after the close today and get their hands on the conference call transcript if they cannot listen to the call live tomorrow (see news release here with details for the call). We suspect that the story will get even better here, and although we will not be able to catch the call live, we will read the transcript tomorrow night.

We were shareholders for a while, but rode one of the bounces higher by some 10% and had to exit and lock in profits. We love the story, and will soon see whether the next chapter will be as rewarding as the previous few.

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Chart courtesy of Yahoo Finance.

Speaking of highs, we noticed that some of the larger oil names are either at or very near their highs, and found it interesting that Exxon Mobil (NYSE:XOM) was near its highs in the $93 area even with natural gas where it is. For those living under a stone, or simply unaware, Exxon is the largest natural gas producer in the country and the company has a bit more exposure to the dry stuff than its peers. We found this interesting this morning and simply wanted to highlight it.

It appears that if the shares can break through the $92/share level, then we would see a retest of the yearly highs. But $92 appears awfully strong.

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Chart courtesy of Yahoo Finance.

Barron's, the weekly stock publication, took another shot at Linn Energy (NASDAQ:LINE) and caused shares to tumble $2.69 (7.00%) and close at $35.75/share yesterday, with volume rising to 17.8 million shares. It seemed like old news, which was simply recycled and given a biased spin. Saying that the company's shares would likely tumble if the distribution was ever lowered is equivalent to saying the sky is blue -- a big "duh" if you ask us. If one believes that commodities are headed higher -- specifically oil, NGLs, condensates, and dry natural gas -- then these MLPs are a great way to play the trend while also collecting a decent yield.

Precious Metals

Gold has bounced back nicely from the lows, with the gold equities taking longer to do so, but slowly making their way higher as well. Shares in Barrick Gold (NYSE:ABX), like physical gold, have bottomed and begun what appears to be a new uptrend, but we are cautiously optimistic here. To answer a reader's question from yesterday, yes we still hold our entire position of junior gold exploration firm Mawson Resources (OTCPK:MWSNF), but we feel that it has more potential upside on a recovery than the bigger names. The risk-on trade will have to resume in a powerful way for anyone to make big money on either the large gold miners or junior explorers, but we have chosen to stick to our guns and keep the added risk that accompanies the juniors for now, although our conviction is lacking on this.

Why would one not decide to be long the junior vs. the big-cap miner at these levels? It seems prudent, especially with drill results and exploration fieldwork to start soon.

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Chart courtesy of Yahoo Finance.

Cliff Watching

Sadly, watching Cliffs Natural Resources (NYSE:CLF) has become one of our favorite pastimes in the market these days, and it is akin to watching fireworks, etc. It seems safe to assume that volatility will be high on a daily basis, and you will either see a ton of green or an awful lot of red. The trend of late has been more green than red, and that is a good thing for those who went long near the lows. Yesterday's powerful move took shares above the $20/share level we believe to be important for psychological reasons, and in fact carried it above the $21/share level as well. Strangely enough, this coal name is performing better than some of its peers at this point, which itself is impressive when one considers the issues. See if shares can hold the $21/share level.

Disclosure: I am long OTCPK:MWSNF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.