How to Trade Oil & Gas Exploration Companies Anadarko and Apache

NEW YORK (TheStreet) -- Shares of independent oil and gas exploration companies Anadarko Petroleum (APC) and Apache (APA) have rebounded with the price of crude oil and have year-to-date gains of 14% and 9.3%, respectively.

Anadarko is scheduled to report quarterly results after the closing bell on Monday, and Apache plans to report before the opening bell on Thursday. Both are expected to report losses of 62 to 63 cents a share.

Crude oil declined 61% from its June 13 high of $107.68 a barrel to its March 18 low of $42.03.

Shares of Apache had a peak of $104.57 well after crude oil peaked on July 31 and declined 48% to a low of $54.34 on Dec. 16 well before crude oil bottomed. Similarly, Anadarko didn't peak until Aug. 26 with a high of $113.51, and its share price drop of 37% also bottomed with a low of $71 on Dec. 16.

Let's look at the daily and weekly charts for Anadarko and Apache and provide the key technical levels at which to buy on weakness and the key technical levels at which to sell on strength.

Investors not familiar with technical analysis should begin with the notion that a price chart for a stock shows a road map of past price performance, which provides guidance for predicting future share price direction.

Here's how to read a daily chart: There are two moving averages to follow; the 50-day simple moving average is in blue, while the 200-day SMA is in green.

Here's how to read a weekly chart: This chart shows weekly price bars going back to the beginning of 2007 and thus includes the crash of 2008, then the current bull market for stocks that began in March 2009.

The red line tracks the ups and downs of the key weekly moving average. The green line is the 200-week SMA.

The red line that oscillates along the bottom of the chart is the momentum reading on a scale of 0 to 100. A reading below 20 is oversold, and a reading above 80 is overbought.

A technically positive weekly chart occurs when a stock ends a week above its key weekly moving average with the momentum reading rising above 20.

A technically negative weekly chart occurs when a stock ends a week below its key weekly moving average with the momentum reading declining below 80.

Here is the daily chart for Anadarko:


Courtesy of MetaStock Xenith

Anadarko had a close of $93.92 on Friday, up 14% year to date and is 32% above its 2015 low of $71 set on Dec. 16.

The stock has been above its 200-day SMA of $91.42 since April 15 with its 50-day SMA of $86.10. Note the 37% decline from the high of $113.51 on Aug. 26 to the low of $71 set on Dec.16:

Here is the weekly chart for Anadarko:


Courtesy of MetaStock Xenith

The weekly chart for Anadarko is positive but overbought with the stock above its key weekly moving average of $88.75, with the 200-week SMA of $83.68 as the longer-term uptrend and the "reversion to the mean." The momentum reading for the stock is 80.04, just above the overbought threshold of 80.

Investors looking to buy Anadarko should place a good 'til canceled limit order to purchase the stock if it drops to $83.32, which is a key level on technical charts until the end of next month.

Investors looking to reduce holdings should place a good 'til canceled limit order to sell the stock if it rises to $98.21, which is a key level on technical charts until the end of the year.

A key technical level of $90.78 should provide a magnet until the end of next month.

Here is the daily chart for Apache:


Courtesy of MetaStock Xenith

Apache had a close of $68.48 on Friday, up 9.3% year to date and is 26% above its 2015 low of $54.34 set on Dec. 16.

The stock has been below its 200-day SMA since Oct. 2 with this average now at $75.61. The stock has been above its 50-day SMA of $64.57 since April 6.

Note the 48% decline from the high of $104.57 on July 31 to the low of $54.34 set on Dec. 16.

Here is the weekly chart for Apache:


Courtesy of MetaStock Xenith

The weekly chart for Apache is positive, with the stock above its key weekly moving average of $65.73 and the 200-week SMA of $85.87 as the longer-term uptrend and the "reversion to the mean." The momentum reading for the stock is at 64.81 this week, up from 59.37 last week.

Investors looking to buy Apache should place a good 'til canceled limit order to purchase the stock if it drops to $61.66, which is a key level on technical charts until the end of the week.

Investors looking to reduce holdings should place a good 'til canceled limit order to sell the stock if it rises to $81.88, which is a key level on technical charts until the end of next month.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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