Is Apache finally ready to power up?
This Texas energy company has been in a rut for years, but a reversal seems to be on the horizon.
By Stoyan Bojinov, CommodityHQ.com
Markets remain under bearish pressures this week, with investors still on edge about the Federal Reserve's recent discussion of scaling back its bond repurchases.
At this point, sentiment is quite unclear and volatility levels remain high because any upbeat economic data can be interpreted as a sign that the Fed will in fact taper ongoing stimulus measures sooner than expected; likewise, any lackluster data releases are also a reason to lock in profits, given that the S&P 500 Index ($INX) is still sitting on hefty year-to-date gains -- upwards of 10%.
The recent sell-off is a blessing in disguise for many eager investors who have been patiently waiting on the sidelines for an attractive entry point in hopes of jumping aboard the bull train. As such, we take a closer look at a beaten-down U.S. energy stock that offers a lucrative buying opportunity for those with a stomach for risk and a longer-term investment horizon.
Consider Apache Corporation's (APA) three-year daily performance chart below.
The Houston-based energy company has been stuck in a dismal downtrend over the past few years, as made apparent by its lower highs and lower lows; this stock has also been fairly consistently trending below its 200-day moving average (yellow line). It's managed to retest this line of support on several occasions, only to fail and continue sinking.
What's noteworthy this time around is that APA actually appears to be stabilizing above its 200-day moving average.
Notice how this stock's 20-day (red line) and 50-day (blue line) moving averages are both trending higher, while the security price itself has also broken above the 200-day line. This suggests that short- and medium-term momentum is turning bullish, while the longer-term gauge still needs to be confirmed -- as APA has previously had false breakouts above its 200-day moving average, as seen in February 2012.
Establishing a long position in APA at the moment is attractive given the lucrative upside potential and the opportunity to closely manage downside, as shares are trading near historical lows.
Despite crossing above their 200-day moving average, Apache shares are still susceptible to a steep sell-off given the longer-term downtrend at hand combined with the clouds of uncertainty looming over the broader equity market.
In terms of downside, this stock has major support around the $80 level, while selling pressures may resurface as it nears resistance around $87.50 a share. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
More from MoneyShow.com
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Stocks drift lower and bonds are hit as investors await the Fed. Prepare for higher volatility this week.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.