Four Must-See Charts: Commodity and Energy Stocks - 9888 views

Should investors look to jump back into the commodity and energy complex?

Gold prices surged on Friday to a three-month high, helped by soaring crude oil prices as investors flocked towards safety in an uncertain market. Gold prices jumped $37 to close at $895.80 an ounce which represents the highest closing price since early October.

Silver also jumped 57.5 cents to close at $11.94 an ounce and copper added 7.6 cents to settle at $1.472 a pound. The Dow Jones Industrial Average closed down 45 points, or 0.6%, to 8077 and the Nasdaq finished higher by 21 points, or 0.8%, to 1477.

Energy prices followed the sharp move higher in metals. Light, sweet crude oil for March delivery surged over 6%, or $2.80, to close at $46.47 a barrel. Gasoline futures added 5 cents to $1.143 a gallon. Heating oil futures traded up 9.76 cents to $1.4462 per gallon. The one loser, natural gas, however, fell 12.4 cents to $4.557 per 1,000 cubic feet.

It’s clear that the metals and energy markets are starting to heat up. Investors could be pouring capital into these sectors for a number of reasons like inflation fears, safety against falling equity prices and on higher demand. Over the weekend, Barron’s published a cover story that was bullish on big oil stocks like ExxonMobil (XOM) , Total (TOT), Chevron (CVX) and Petroleo Brasileiro (PBR). Barron’s says the price of oil is due to rise after falling from the July 2008 highs of $147 a barrel.

The entire commodity and energy complex has fallen out of favor with investors, which is probably one of the reasons Barron’s decided to feature the oil sector with a cover story. When a sector becomes depressed it can often be the best time to look for investment opportunities. Sentiment in these sectors is also negative which could be signaling it’s time to take a contrarian view.

With that in mind, let’s consider four charts that could be signaling it’s time to re-enter the commodity and energy stocks.

1. Pan American Silver

One commodity stock that looks very attractive right now is Pan American Silver (PAAS). Pan American is engaged in silver mining and related activities, including exploration, mine development, extraction, processing, reefing and reclamation. From a technical standpoint, the stock’s chart is showing a very nice uptrend channel, following a triple bottom pattern made back in November and December.

Stockcharts.com

Shares of Pan American Silver have cleared some resistance above $18.30 and look ready to make a run back towards $26 a share. Investors should expect to see some resistance at the 200-day moving average of $23.85 s share. With the stock trading currently at around $18, a move towards either level would make for some solid gains.

2. Gold Fields

Another metal-focused company with a compelling chart is gold miner Gold Fields (GFI). Gold Fields is a South Africa-based firm engaged in the exploration, extraction, processing and smelting of gold in South Africa, Ghana, Australia and Peru. Shares of GFI are displaying a bullish uptrend channel that started to form back in November. The stock is also signaling a very strong buy signal, with shares breaking above the 200-day moving average at $9.88 on extremely heavy volume. The 30-day average volume is 6,689,860 and on Friday a whopping 15 million shares traded hands. Gold Fields looks poised to make a run back towards $13 a share or even higher if the bullish trends continue.

Stockcharts.com

3. Hess

For an oil and gas play, consider putting Hess Corporation (HES) on your radar. Hess is a global integrated energy company that operates in two segments: Exploration and Production (E&P) and Marketing and Refining (M&R). Shares of Hess have found support at the 50-day moving average of $50.48 and the chart has formed a bullish uptrend channel from back in November. If shares can break out above the $64 level, then it could make a bullish run higher. The 30-day average volume is 6,654,000, so watch for volume to start expanding for confirmation of institutional buying.

Stockcharts.com

4. Alpha Natural Resources

One last name to watch is coal supplier Alpha Natural Resources (ANR). Alpha Natural produces, processes and sells steam and metallurgical coal from eight regional business units, which are supported by 32 active underground mines, 26 active surface mines and 11 preparation plants located throughout Virginia, West Virginia, Kentucky and Pennsylvania, as well as a road construction business in West Virginia and Virginia that recovers coal.

This stock was clearly a victim of hedge fund redemptions as ANR fell sharply from over $70 a share all the way down to $14 a share. The chart of ANR is now showing a sideways trading pattern/channel as the stock trades back and forth from $22 a share to $14 a share. This type of pattern can often signal that the stock is under accumulation as investors continue to support the price at the lower end of the trading range. Watch for the stock to break above $22.50 for confirmation of a possible run higher. As of Dec. 26, 2008, the percentage of the float sold short stood at 5%, so it’s possible the stock could experience a nice short-squeeze if it can break above the high end of the trading range.