I was born to run, I was born to dream, the craziest market you’ve ever seen…
It’s a play on the 80’s band Loverboy’s Turn Me Loose lyrics, but man, they seem appropriate. Good news, stocks zoom; bad news, stocks zoom; no news, stocks zoom. One of the craziest markets you’ve ever seen.
The NASDAQ started the week with a gap higher and then continued to move up some more. From a technical perspective, it looks an awful lot like a confirmation gap, meaning the tech-oriented index is likely to go up some more.
However, there could be a temporary lid straight ahead. The NASDAQ is on course to move into overbought territory if the index adds a few points. The last time investors pushed the NASDAQ north of a 70 reading for relative strength, it backtracked from 14,800 to 14,200 in a couple of days. That was the worst of it as it pivoted higher following five days of profit taking.
It would not be surprising to see the NASDAQ add to its week total into the Labor Day Holiday weekend and then take some off the top when summer season is over -sad on both accounts. Should sellers take over with the NASDAQ getting a little overvalued in the short-term, it probably won’t be long before the bulls start singing Turn Me Loose.
Oil, gas, and exploration straight up rocked last week, gaining more than 8%. It’s like they found some black gold or something in Green Acres. Both SPDR S&P Oil & Gas Equipment & Services ETF (XES) and SPDR S&P Oil & Gas Exploration & Production ETF (XOP) possibly hit a short-term bottom recently but butted against some resistance on Monday and retreated. Both could settle back 5% or so, but with inflation projected to be with us for a while, commodity prices should have winds at their backs.
Of the two, we prefer the look of SPDR S&P Oil & Gas Exploration & Production ETF (XOP).
In our opinion, Matador Resources Company (MTDR) offers investors one of the best combinations of fundamentals and technicals of XOP’s holdings. Fundamentals tell you what to buy and technicals tell you when to buy.
Fundamentally, the independent energy company is one of a few XOP holdings with a return of investment (ROI) above 10% (15.69%), Debt to Total Capitalization below 50% (48.98%), and lower price to cashflow (P/Cf) ratios of 7.81.
Technically, Matador pivoted higher at $25ish, breaking roughly a two-month downtrend. The current move higher has the early markings of a “V” shaped reversal. If that’s the correct call, then MTDR could follow a similar path higher as it followed in its fall, which could put the stock around $36 in the next few months.
Matador Resources Company (MTDR) could be appropriate for investors with above-average risk tolerance that want exposure to oil and gas.