Apache Offers a Quick Trade Opportunity

 | Jan 02, 2014 | 12:18 PM EST  | Comments
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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. But it's certainly not had the best luck in the assets it's owned through 2012 and through part of 2013, as much of its 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, causing 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. 

 

Apache (APA)
Source: TradeStation

 

This is a formation I particularly like as the fast/slow stochastics have just begun 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. Jan. 18 options have little more than two 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 $90s -- admitting that you've got to be willing to lose 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 it's one of many we'll be suggesting in what I think will be a more difficult 2014. 

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