The Stock: BNK Petroleum Inc. (BKX-T)
Recent price: $5.42
Political turmoil in the Middle East is again sending world oil markets on a speculative ride, with the price of West Texas Intermediate soaring close to $100 (U.S.) a barrel. Investors dipping into energy stocks should be strapped in for volatility. However, for those who want less drama in their portfolio, an investment in natural gas may be the way to go.
Natural gas investors have suffered from more than two years of weak prices. Many have bet on the end of the commodity's bearish trend, only to be disappointed. Natural gas prices are still depressed, and exchange-traded funds that invest in the commodity, such as the Claymore Natural Gas ETF and Horizons BetaPro Winter-Term Natural Gas , are not sending many positive signals to technical trend traders.
Some natural gas stocks, though, are plenty warm. Large-capitalization U.S. natural gas plays like El Paso Corp. , Chesapeake Energy Corp. and Williams Cos. are among a number of bullish trending components of the NYSE Arca Natural Gas Index, which is up almost 15 per cent in the past three months.
Junior gas stocks also hold appeal. The BMO Junior Gas Index ETF - representing holdings of junior producers such as Rosetta Resources Inc. and Fairborne Energy Ltd. , a current Stock Trends pick - has logged steady advances in recent weeks. Within the group are some bullish trending stocks that could provide ample returns for investors ready to go long natural gas stocks.
The Trade: TSX-listed BNK Petroleum Inc. is a natural gas play with shale basin assets in the United States and Eastern Europe. A Stock Trends Bullish Crossover breakout stock pick last October when the share price rallied to $3, this investment rewarded market timers over the following three months, peaking at $5.60 in January before retreating. The stock held this month above price support set earlier, and is now trading above $5.40 after advancing 16 per cent last week. Look for stronger trading volume to elevate this investment toward another round of price momentum.
The Upside: Technical traders will be expecting this stock to soon best its highs of last month. Any whiff of improvement in the price of natural gas should help BNK Petroleum shares continue to outperform the broad market, possibly adding a 40- to 50-per-cent gain if the momentum continues.
The Downside: Another pullback to the $4.20 level will test this trade and send some anxious traders to the exit.
- Crude Oil Front Month Futures$45.80-0.23(-0.50%)
- Henry Hub Natural Gas Front Month Futures$2.15+0.08(+3.66%)
- Horizons NYMEX Natural Gas ETF$6.90+0.01(+0.15%)
- Chesapeake Energy Corp$6.83+0.05(+0.74%)
- Williams Companies Inc$19.01-0.63(-3.21%)
- Bmo Junior Gas Index Etf$15.450.00(0.00%)
- BNK Petroleum Inc$0.31-0.01(-1.59%)
- Updated April 29 10:51 AM EDT. Delayed by at least 15 minutes.