Williams Partners (WPZ) has the MLP ETF on the move over the last few days. This one is a bit tricky here. WPZ held a place in the top 10 holdings for several MLP ETFs, and now there are a few of those ETFs threatening to break out higher after they looked ready to roll over. So, is WPZ masking a bigger concern here or is this the turn these ETFs, like the UBS E-Tracs Alerian MLP Infrastructure ETF (MLPI), needed?
Looking at the short-term chart on MLPI, it is clear to see the pullback that started in early March. The juice from WPZ gave MLPI a push higher into resistance, but the reason I don't think WPZ is masking a bigger problem is that the bounce for MLPI started a day earlier. The ETF came down to the lower Bollinger band, and unlike past trips there, it bounced on the first try. We haven't seen that in over seven months, so that means something to me here.
Furthermore, we had a bullish cross in the slow stochastics from a sub-30 area. This too has been bullish in the past. Now, it appears the price action was the setup for a cup-and-handle pattern, which is a consolidation pattern. This would be a consolidation of the move higher, which began in mid-March.
What I find most appealing here is you don't have to wait long to learn if WPZ was a smokescreen. In fact, you don't even have to buy yet. The breakout area is $40. A close over $40, or preferably consecutive closes over $40, should indicate a breakout. However, if MLPI falls back under $39, then it is time to just sit and wait. A close under $38 and I would actually be looking short MLPI, as I believe we'd retest $36.
I really don't care if WPZ was a smokescreen. I believe the action created due to the buyout has made a much clearer picture for MLPI and we simply need to wait a short amount of time to get a clear vision. If I had to lean one way, and I am leaning one way, it would be bullish. Forty dollars isn't too far, and waiting for another 1% move higher isn't giving up very much, so it looks to be worth the wait.
If you aren't a big fan of ETFs, then the three individual names I like most based on their charts are, in order, Targa Resources (NGLS), MarkWest Energy Partners (MWE) and Energy Transfer Partners (ETP), which I already hold. I would put the MWE a very close second to NGLS, but I would classify ETP as the more conservative of the bunch. My preference would be to pair either NGLS or MWE with ETP as a long position rather than buying the ETF, and I'm leaning NGLS right now. Still, an ETF offers you an opportunity to get a rather large basket of sector names without the constant offering risk associated with an individual name.