'Fast Money' Recap: Oil Resumes Fall, Market Volatility Returns

NEW YORK (TheStreet) -- West Texas Intermediate resumed its decline, plunging 4% on Wednesday. The commodity is likely to find support near $60 per barrel, Brian Kelly, founder of Brian Kelly Capital, said on CNBC's "Fast Money" TV show. 

Both the U.S. and OPEC have cut their 2015 oil demand estimates, which means global growth could be slowing, he added. Perhaps investors are starting to realize this, hence the selloff in the broader market with the S&P 500 down 1.65%. 

Volatility is certainly returning to the market, said Tim Seymour, managing partner of Triogem Asset Management. Weak global economies are driving up the demand for U.S. assets, such as stocks and bonds. 

Crude oil is likely to bottom near $57 per barrel in early January, he added. Investors can consider buying integrated oil stocks such as ConocoPhillips (COP) and Exxon Mobil (XOM) . 

Oil can go lower than $57 per barrel, possibly to $45, according to Steve Grasso, director of institutional sales at Stuart Frankel. If demand is truly the issue behind lower oil prices, the market could be in for a rude awakening.

It's probably too early to buy most energy stocks, said Karen Finerman, president of Metropolitan Capital Advisors. However, she did buy April-dated call options on Seadrill (SDRL) , looking for a bounce. Investors in the stock market seem to be "panicky," she added. 

The large decline in energy stocks should create a few M&A opportunities, according to Mike Kelly, managing director and senior analyst at Global Hunter. Specifically, Whiting Petroleum (WLL) , Energen (EGN) and Laredo Petroleum Holdings (LPI) could be takeover targets by large companies such as Diamondback Energy (FANG) and Marathon Oil (MRO) . 

Pioneer Natural Resources (PXD) seems an attractive company for investors to get long, Grasso said. Don't forget about energy infrastructure, such as pipeline companies, Seymour added. These companies don't depend on rising or falling oil prices but get paid for transporting it instead. 

On Apple (AAPL)  , Gene Munster, senior analyst at Piper Jaffray, has a buy rating with a $135 price target. He said the company's holiday sales are likely to be very strong and the upgrade cycle is likely to go on for longer than many expect.

The December quarter will be strong, as will the March quarter due to Chinese sales, but Munster predicts that June will be impressive, too, due to strong overall demand. Demand will also keep inventories lean, which will likely drive up gross margins, he added. 

Grasso, who is long Apple, said shares of the tech giant may be getting sold due to fund managers looking to lock in profits on the year. If they have exposure to the energy sector, they may be selling Apple to raise cash. 

Generally, stocks with the highest short interest levels tend to outperform those with the lowest short interest levels when in a rising market environment, according to Paul Hickey, co-founder of Bespoke Investment Group. 

However, 2014 has been different. As the broader market has risen 9.6%, stocks with the lowest short interest levels have outperformed the stocks with the highest short interest levels. He also noted this trend in the energy space. Investors are no longer giving the benefit of the doubt to small-cap companies with higher debt, which are more susceptible to higher interest rates. Instead, they are opting for large companies, which also have low levels of short interest, he said. 

One stock that has a high short interest is Sanderson Farms (SAFM) . However, according to Kelly, investors can stay short this name due to rising food commodity costs. 

For their final trades, Seymour said to buy ConocoPhillips with a stop-loss at $60 and Kelly is a buyer of the Market Vectors Gold Miners ETF (GDX) . Grasso is buying Southern Company (SO) and Finerman is a buyer of call options on Seadrill. 

-- Written by Bret Kenwell

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