Energy sector stocks ended January 20.1% overvalued vs. being just 3.9% overvalued as 2006 began. This supports the views I presented in my column covering the Energy Sector on Jan. 27, Best Plays in Energy are the Big Boys.
When crude oil was at $59.94 on Dec. 6, I profiled Cimarex Energy (XEC - commentary - Cramer's Take) as the best choice as a stock to trade a rally in crude oil prices. The stock ended January at $45.56, up 13.1% from the close of $40.30 on Dec. 6. Today, XEC is just 3.3% undervalued with fair value at $46.54.
The weekly chart profile shows rising momentum with the five-week MMA at $44.03. My model shows monthly risky levels at $47.08 and $47.45, suggesting that the 52-week high at $47.80 set on Jan. 20 should not be breached over the next month or so. Therefore, I would book profits on this energy play and focus on the big-cap energy stocks with market caps above $90 billion.
Then on Jan. 3, I profiled Fording Canadian Coal Trust (FDG - commentary - Cramer's Take), which performed well in January and ended the month at $40.82, which was up 13.1% from its close of $36.10 on Jan. 3. Today, its weekly chart profile shows rising momentum with the five-week MMA at $38.99. My monthly value level is $32.35 with my monthly risky level at $44.24. I would consider reducing this holding by 25% on strength to $44.24.
P.S. Will you be there when Cramer makes his next move?
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Richard Suttmeier is president of Global Market Consultants, Ltd., chief market strategist for Joseph Stevens & Co., a full service brokerage firm located in Lower Manhattan, and the author of TheStreet.com Technology Report newsletter. At the time of publication, he had no positions in any of the securities mentioned in this column, but holdings can change at any time. Early in his career, Suttmeier became the first U.S. Treasury bond trader at Bache. He later began the government bond division at L. F. Rothschild. Suttmeier went on to form Global Market Consultants as an independent third-party research provider, producing reports covering the technicals of the U.S. capital markets. He also has been U.S. Treasury strategist for Smith Barney and chief financial strategist for William R. Hough. Suttmeier holds a bachelor's degree from the Georgia Institute of Technology and a master's degree from Polytechnic University. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he invites you to send your feedback -- click here to send him an email.
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