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Dan Dicker

Dan Dicker

Dan Dicker is a 25 year veteran of the New York Mercantile Exchange where he traded crude oil, natural gas, unleaded gasoline and heating oil…

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A Quick Trading Opportunity for 2014

I’m not giving up on any of the long-term energy trends that I pointed out and traded successfully in 2013, but I do believe we’ll need more nimble moves to generate wins this year compared to last.  I just don’t think I’ll find many deep value stocks like Noble (NBL) or Cimarex (XEC) with 30% or more quick potential upside this year.  

So let’s make a start to the New Year with one quick trading opportunity I see:  Apache (APA).

Apache has been a stock I’ve liked to circle back to often, as I think they have one of the strongest technical E+P teams out of the independent oil companies I follow.  It’s certainly not, however, had the best luck in the assets it’s owned through 2012 and through part of 2013, as much of it’s share price was tethered to the 17% of assets associated with Egypt, a continuing political disaster.  Those assets, as well as a (so far) unremarkable effort in leased acreage in Alaska kept Apache looking like little more than a ho-hum loser of an oil and gas stock through much of the last two years.  

But since hitting a low under $70 a share in the Spring last year, Apache has made some interesting and positive moves, including divesting much of the Egyptian risk to Sinopec in China and purchasing fire-sale assets in the Permian basin from BP (BP).  While these were not game changing for the company, they have both helped the Street reevaluate shares and Apache saw a nice healthy rise to trade close to $95 a share in November.  

Maybe there was a bit too much froth, as just the word “Permian” seemed to goose any oil stock associated with it in the fall of 2013.  But Citibank gave a strong downgrade in December, casing shares to slide more than 10% to date. While other Permian shares have already had an end of year rebound, Apache has so far not participated.

I think it will.  This is not a world-beater stock, but just a finely run, quality oil company and the chart particularly sets up for a healthy rebound of shares in the next two weeks.

This is a formation I particularly like as the fast/slow stochastics have just begin to turn over while accumulation again has turned green after a steady disgorgement.  Add that to a collapsing Bollinger band that indicates a significant move in the offing and I’m ready to bet it will be up.  

One cheap way to play this is with options:  January 18 options have little more than 2 weeks to run, enough to see the shares rebound if they’re going to.  Two strikes to look at would be the $87.50 calls or the $90’s – admitting that you’ve got to be willing to loose 100% of whatever commitment you make here, although I think you’ll see a share price over $90 again very quickly.

Only a short-term trade this week, but hopefully one of many we’ll be suggesting in what I think will be a more difficult 2014.

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