In an installment of his "Power Rankings" segment of Mad Money Monday night, our own Jim Cramer drilled into the energy sector to see which stocks are worth buying. He said Anadarko Petroleum Corp. (APC) was a stellar operator that must be bought. Working for Jim for the past three years I am in awe of his grasp of the fundamentals of so many companies, but as a humble technical analyst I fall back on the charts and indicators.
In the daily bar chart of Action Alerts PLUS holding APC, below, we can see a strong advance from December to July followed by a correction into a September low. The moving averages are giving us mixed signals. Prices are above the declining 50-day moving average line but above the rising 200-day line. APC briefly broke the rising 200-day line in September and now the 50-day line could soon cross below the 200-day line for a bearish dead cross signal.
The most bullish indicator on the chart is the daily On-Balance-Volume (OBV) line. The line doesn't really decline in August or September when prices declined. This tells me that APC longs did not liquidate or sell much as prices dropped $16.
The Moving Average Convergence Divergence (MACD) oscillator is above the zero line and could turn up or down depending on the direction of prices ahead.
In this weekly bar chart of APC, below, we can see that prices are above the rising 40-week moving average line. The weekly OBV line is OK but it would be better if it could lead on the upside with strength now.
The weekly MACD oscillator is narrow but above the zero line -- a turn up would be bullish.
In this Point and Figure chart of APC, below, we can see an upside price target of $90.11. A decline to $65.43 would be a short-term negative.
Bottom-line strategy: Risking below $63 for now, traders could go long APC at current levels and on strength above $71. My longer-term upside price target is $90.