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Why You Should Buy EQT During an Oil & Gas Exploration and Production Flush

October 23, 2013 | About:
Wednesday's market action hasn't been very good, though citing "liquidity concerns from China" as the primary driver of a 12 point drop on the S&P 500 in the first half-hour of trading isn't exactly a compelling cause for major concern.

Nevertheless, when the "necessary pullback" during bull runs does happen, certain spaces get slammed. Wednesday, it looks like Semiconductors and Oil & Gas Exploration & Production are the sub-industries taking a beating. While it's probably not the greatest strategy to pick out buys in problem areas, EQT Corp (EQT) presents itself as a great buy this morning.

First, take a quick look at other Oil & Gas Exploration & Production stocks on a daily chart, just to get an idea of what's happening in the space today: FANG, BCEI, GPOR, EPL, XEC. They all elicit the same reaction: "Ouch!"

Now take a look at EQT, and suddenly it looks like we're dealing with a steady Staples stock. Buyers have stepped in this morning, and currently EQT is the best performing stock in the entire sub-industry.

EQT has been a "buy" ever since it held the $85 support level in the second week of October. After pulling back from weekly highs of $92.75 in mid-September, the stock pulled back to the $85 area over the next three weeks and quickly bounced higher, maintaining its positive trending and comfortable technical set-up.

Today's price action is even more encouraging. Despite residing in a sub-industry that is getting crushed this week, EQT has held up extremely well, and there has been some positive buy-side action on healthy volume this morning. Oil & Gas is one of those spaces that pulls back violently for a few days, then turns on a dime. Given the recent action, EQT should be able to hold the $85 price level while traders hammer this "rotation" move.

Even at current prices, EQT is an attractive buy as it hovers above its 50-day moving average. Thus, today's pullback in the space can be viewed as more of an "opportunity" or "discount" rather than a legitimate concern.

So, with a stop at the $85 area that recently held, and prospects for a move back to the mid-$90's, EQT is today's most compelling buy. Oil & Gas may not be a great space to play at the moment, but a good mantra to trade by is to "own the best and ignore the rest!" Below are some comparative charts showing EQT's relative out-performance of FANG (what a lot of Oil & Gas Exploration & Production stocks look like), just to visually show the ideas.

EQT.png

FANG.png

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FANG1.png

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When to Consider Entering the Trade:

Buy at the current price (~$87.98).

When to Consider Exiting the Trade:

At a close below $85.22 (Breakdown) / A close above $91.41 (Profit-Taking)

Disclosure: At the time of publication the editor and affiliated companies own the following positions: EQT

Note: Positions may be bought or sold while this publication is in circulation without notice.

EQT Corp - Last 30 Days

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EQT Corp - Last 3 Months

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EQT Corp - Last 6 Months

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Mr. David Moenning is a full-time professional money manager and is the President and Chief Investment Strategist at Heritage Capital Management. He focuses on stock market risk management, stock analysis, stock trading, market news and research. Click here to claim a free copy of Dave's Special Report on changes in the current market.

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