Thursday, January 29, 2015

$HES Breakdown Gives Us a Target

I wrote a piece for today in which I explained my reasoning why I think West Texas Intermediate Crude Oil (the U.S. benchmark) will remain below $50 for the rest of the year. I could be wrong -- especially if the US dollar goes bananas -- but this is how I see things.

That doesn't mean there won't be buying opportunities before the end of the year.  In fact, my colleague Dave Fessler talked about one such stock in his column last week. "Why 2014’s Worst Performer Could Be 2015’s Biggest Sleeper Play"

To be sure, Dave is more bullish on oil than I am.  But that doesn't mean I don't think we'll see bargains worth buying this year. On the contrary, once select stocks get beaten down far enough, they'll be excellent buys.

One stock Dave said he liked was Hess Corporation (NYSE: HES). You can read his reason why HERE. And Dave said: 
The company had a production target of between 92,000 and 97,000 barrels of oil equivalent per day from the Bakken by the end of this past December.
I expect them to meet or possibly even exceed that number when earnings are announced on January 28.
Well, Hess announced earnings and production all right. And sure enough, Dave was right about Bakken production beating expectations. 

In fact, Hess'  Bakken output came in at 102K barrels of oil equivalent (boe)/day. That represents a ~50% year over year increase.

What's more, HES expects overall FY 2015 production to average ~350K barrels of oil equivalent per day, up ~10% year over year.

So, should you buy Hess now? I don't think so. The energy sector as a whole and oil producers in particular have some more downside work to do. 

The good news is, the end is in sight.  I just did some technical analysis of a Hess chart, and here's what it shows ...

Visit to see more great charts.

(Updated chart)

What we see in this chart is a breakdown from a classic symmetrical triangle pattern. This breakdown gives us a target of $54. Hess doesn't have to stop at $54, of course. But I don't think we're that far from an oil bottom -- I just think that prices will flatten out for much of the year. 

If I'm right, once prices stop going down, bargain-hunters will come into the sector. And I think Hess is one of the stocks they'll start sniffing at.

Now, what can you play in the meantime? Well, I've got all sorts of ideas I'm sharing with Oxford Resource Explorer and $10 Trigger Alert subscribers. There is plenty of money to be made in energy in this market -- on stocks of companies that do well when energy prices go down.

You just have to be willing to think outside the box.

Keep your eye on Hess ... keep your eye on $54 ... and keep your eye on global supply and demand.

Good luck and good trades.

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