Jim Cramer explained in a Real Money column Monday that when oil prices plunge, typically a big chunk of our economy rallies. But in a Covid-19 world, the airlines, cruise lines and even gas stations have more oil than they need, which is why storage plays like Nordic American Tanker Shipping Ltd. (NAT) surged as the oil industry filled up every available storage option.
Let's check out the charts and indicators of NAT this morning.
In the daily bar chart of NAT, below, we can see the sharp change in trading volume since October. It seems that some far-sighted investors may have recognized the oil storage problem (and opportunity) months ago and not just the other day.
The daily On-Balance-Volume (OBV) line began to rise from September indicating more aggressive buying and the slopes of both the 50-day moving average line and the 200-day moving average line turned positive.
The Moving Average Convergence Divergence (MACD) oscillator has been showing stronger trend strength since early October.
In the weekly bar chart of NAT, below, we can see the price action over the past three years. Prices made a "long base" or "line pattern" around $2 before a rally to $5.
Trading volume increased and the weekly OBV line shows rises and pullbacks as some aggressive money came into the stock and left for other opportunities. The MACD oscillator is crossing to the upside now for a new outright go long signal.
In this daily Point and Figure chart of NAT, below, we can see the price history back to 2009. Here the price base is not as impressive, in my view, but the chart shows a potential price target of $9.25, which is still a big percentage move from current levels.
Bottom-line strategy: The storage problems and the supply/demand situation of the crude oil market are not going to be solved right away, in my opinion. That problem is an opportunity for NAT to rally further. The bar chart shows that prices can go down as well as up so trading NAT is really only for the nimble and experienced.
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