Commodities Today: Breakouts Happening In Certain Key Names

Includes: AUY, GST, HK, LNG, OAS
by: Matthew Smith

The jobs numbers were pretty disappointing this morning and that has forced the 10-year rate down from around 3%, which it hit yesterday. The markets are in a bit of a weird spot here as good economic news is interpreted as bad and bad economic news is interpreted as being good for stocks. That is all short-term thinking and bad jobs numbers simply compound the negatives facing the economy. We need job growth to pick up in order for GDP numbers to increase and to get some good inflation going. Until the growth kicks up and we have some good inflation showing up in the numbers it is hard to get uber bullish of the entire commodity arena.

Chart of the Day:

With the recent price action we are now right back where we started, watching palladium fight through the $700/ounce resistance.

(Click to enlarge)

Source: Kitco

Commodity prices this morning are as follows:

  • Gold: $1381.10/ounce, up by $8.10/ounce
  • Silver: $23.755/ounce, up by $0.50/ounce
  • Oil: $109.53/barrel, up by $1.16/barrel
  • RBOB Gas: $2.8594/gallon, down by $0.0234/gallon
  • Natural Gas: $3.558/MMbtu, down by $0.017/MMbtu
  • Copper: $3.2715/pound, up by $0.0275/pound
  • Platinum: $1499.50/ounce, up by $17.640/ounce

Oil & Natural Gas

Cheniere Energy (NYSEMKT:LNG) is now back above $30/share after yesterday's 4.20% move higher on strong volume. This was once the name which led the oil and natural gas names higher and was a top performer before its hibernation over the summer. We have pointed out that the shares were trending higher with the rest of the leaders in the sector and that a breakout for all of these names seemed imminent. Now that we see Cheniere moving higher with the options players behind it via out of the money calls (see article here), our bullishness feels as though it has been confirmed. Look for a move to test the 52-week high in the next few sessions.

It certainly appears that it is time to get bullish again.

(Click to enlarge)

Source: Yahoo Finance

With the bull case having already been stated over the past few months for the sector, we are not surprised at all that names such as Halcon Resources (NYSE:HK) - and a company which we hold a position in - and Oasis Petroleum (NYSE:OAS) have been trending higher. Oasis has seen a move which has been more prolonged based off of the positive happenings the company has been experiencing in the Bakken area. Halcon however had been in a downtrend which saw shares really get hit when the company announced a secondary equity offering and debt issuance. We were bullish then and remain so today. Yesterday's 3.60% move higher in the company's shares indicates that the shares are still alluring to investors and are pretty attractive when compared to other names in the sector right now.

The move by Oasis to add to its Bakken position by buying roughly 161,000 net acres is a real positive (see article here). The company has a good balance sheet and a focus on the 'oily' assets which we like to see. Although the deal will not see Oasis increase the production on the acreage they are acquiring this year, watch for it in the future as they take on two rigs which are currently drilling and expand upon their exploration efforts moving forward across the entire play. The company expects to add 2-3 rigs to the total now being run across their acreage and that which they just purchased next year.

The chart here is a bit more choppy, but based on recent events we can certainly see the possibility of a breakout happening here too.

(Click to enlarge)

Source: Yahoo Finance

But not all is great in oil and natural gas land as Gastar Exploration (NYSEMKT:GST) can attest to. The company saw shares decline 8.68% yesterday before announcing a $187.5 million deal where the company would be acquiring additional acreage around the position they recently purchased from Chesapeake Energy. We like the move towards oil and liquids and away from dry gas, but the market liked the first deal so much and the shares saw such a big bounce that this deal appears to be one which will be muted until the company has some success on the exploration side. For readers looking for a speculative stock with upside potential from exploration, this could be a nice play. We would keep the exposure low, but with that said can see upside potential based off of these recent land deals.


Yamana Gold (NYSE:AUY) is a name which has really been pushed around in the past few months and although it has bounced back we stress to readers that we are very weary of the gold names right now. There is too much uncertainty in too many areas to make investment decisions at this time. Trading decisions can be easily made, but as far as investing goes the risk levels are simply too high for U.S. to want to either add to positions here or create new ones within the gold equities. We like the physical precious metals far more than the equity issues right now mainly due to the cost inputs the companies must deal with. So if you must be long in the precious metals, be long the commodity and not a particular company.

Disclosure: I am long HK. 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.