There is a contingent of oil and gas stocks that continue to perform well even though oil peaked at $53.62 (December futures contract) in June and trades below $47 as of November 18. With oil recently bouncing off support in the $42 region, these strong oil and gas stocks warrant a trade consideration. If oil continues to strengthen in the short-term (and potentially the long-term), these stocks will benefit, bouncing off support and/or breaking to new highs.
Williams Companies, Inc. (WMB) bottomed at $10.22 in February and rallied to a high of $31.85 on November 9, a 211% rise. Despite the recent pullback in oil, Williams continues to trade near its 2016 high, which shows strength. Consider purchases on a breakout above $31.85. Also consider buying on a pullback into the $28 to $27.50 region, with a stop loss below $27. This "buy zone" aligns with 2016 rising trendline, and the November swing low of $27.35. The upside target is $36, based on the approximate size of the recent ranged added to the breakout price.
Conocho Resources, Inc. (CXO) bottomed at $69.94 in January and hit a 2016 high of $143.60 in October. Based on swing lows in September and November, there is a support area between $125 and $121.50. Consider purchases in this region, with a stop loss below $121. Based on the strength of prior rallies within this uptrend, the upside target is between $148 and $149. Based on the rising trendline since June, an alternative trade is to buy between $128.50 and $124, with a stop loss below $123.50. The target is the same as above. Therefore, an entry closer to $124 (as opposed to $129) provides a more favorable risk/reward on the trade.
CONSOL Energy, Inc. (CNX) bottomed at $4.54 in January and rallied to an October high of $20.66. This stock put in swing lows in September and October which established a support area between $16.40 and $15.41. A long trade can be taken in this support area, with a stop loss below $15.30. A rising trendline since June indicates the price may not move below $16 (before moving higher). Based on that, an alternative trade is to buy between $17.50 and $16.50, with a stop loss below the October low of $16.14. The upside target, based on the strength of prior price waves in this uptrend, is $21.50.
The Bottom Line
These oil and gas stocks are in strong uptrends and setting up for another long trade as they bounce off support. All the trades provide favorable risk/reward ratios, based on the estimated targets and stop loss levels. With oil likely to increase in the short-term—as it too recently bounced off support—this will help push these stocks higher. If oil drops or these stocks drop on their own, the stop loss orders help control the risk on the trade. These are swing trade ideas, so the trades are expected last a few weeks to a few months. Only risk a small percentage of account capital on any single trade (for additional reading, see: Optimal Position Size Reduces Risk).
Disclosure: The author doesn't have positions in the stocks mentioned.