Is Apache (APA) breaking out? It might be, rabbit, it might be. You all know -- or at least those of you who read and listen to me know -- that I am long the name, and that I trade it sometimes frequently. In 2017, I recovered from what looked like was sure to be a painful long position in this name, as trading in Apache churned in extremely regular and predictable fashion between August and year's end. This "gift" allowed this trader to catch his breath and repeatedly buy the stock below $40, as well as sell the name above $45.
The last time, however, I decided to make a sale, but hang on more than usual, as APA tried to break past what had been resistance for almost half a year. What does the chart tell us? The daily moving average convergence divergence (MACD) and Money Flow are both working in our favor. Relative Strength has never reached traditionally overbought territory, under-performing both the sector, as well as the broader marketplace.
This could be key. As mentioned above, Natty Gas is currently popping, and there is likely still to be upward pressure on market pricing for that commodity. Ever hear of Alpine High? Yeah, That's Apache, and that's natty gas. (By the way, Apache is also a holding in the Action Alerts PLUS portfolio, which Cramer co-manages as a charitable trust.)
Three items stand out to me on this chart.
One. The Andrews' Pitchfork is a bit broad, but if accurate, the stock could test $50 on the next upswing for the commodity. This could happen early in February.
Two. We have already seen one fairly severe and successful test of former resistance as support. This is key.
Three. The 50-day simple moving average (SMA) is working its way toward the 200-day SMA. The two are still more than $1.65 apart, but that gap has been closing rapidly since the new year. You see a golden cross on this chart, at a time when much of the nation is freezing, and nat gas inventories are running low? Poof! You'll have the potential for a short-term pop.
(This is an excerpt from Stephen "Sarge" Guilfoyle's Morning Recon, which now appears exclusively on Real Money, our premium site for active traders. Click here for a free 14-day trial and receive Morning Recon every day, along with exclusive columns from Jim Cramer, James "RevShark" DePorre, technical analyst Bruce Kamich and more.)
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