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This past "Recovery Day" was anything but - stocks took an absolute pounding on Friday as news broke of a new "omicron" coronavirus variant loose in the world. The Dow dropped more than 900 points, and the big S&P 500 index lost more than 2.3% at one point.
The energy sector was even worse. The Energy Select SPDR Fund (NYSEArca: XLE) tanked more than 6% on Friday. Investors were clearly imagining omicron would torpedo demand for oil and gas, just like the "O.G." coronavirus did back in March and April 2020.
I think that's a tad dramatic. First of all, we don't really know much about omicron yet. We know it's got some potentially scary mutations, but that's about it. Over the next few weeks, scientific consensus will emerge, but the business case for an overall bullish market is still strong.
See, sell-offs like we saw this past Friday are kind of like a feather blowing around in a tornado. Volume was very light - as it always is the day after Thanksgiving - and the trading day was short. The overall economy was no different on Friday than it was on Wednesday. Markets just don't bottom on Fridays, and all the ingredients were there for the bullish trend to resume.
And as if on cue, a fast, convincing rally ignited yesterday morning; by 10:30 a.m. or so, the S&P 500 had already made back half of what it lost on Friday.
Energy is leading the way - the sector should erase those 6% losses over the next day or two. I've charted an energy penny stock that could do as much as 10 times better than that...
The Chart on This $3 Company Looks Great
Today, I'm looking at Baytex Energy Corp. (OTC: BTEGF). This oil and gas company is based in Calgary, near the epicenter of the Canadian oil industry. In fact, Baytex works in the rich Western Canadian Sedimentary Basin and East Texas' Eagle Ford Shale.
Now, I'm on the record as saying green energy is the wave of the future - and it is - but the truth is, current economic conditions favor high oil and gas prices, so it makes sense to be in oil and gas stock right now. Baytex is simply the best (and cheapest) ways to do that right now. It's not necessarily a stock you want to hang on to for years. Own it until it hits my profit target.
Today, BTEGF is trading just above $3. It took a big hit this past Friday, like just about every other stock. Normally, that might upend the technical picture, but the stock is snapping back nicely and still right in my "buy" zone. In fact, the price looks even better today than it did last week.
There's strong support still from its bullish 50-day moving average (MA 50) - the stock is hanging out within a few pennies of that level right now.
When I look at that important "Trader's Trendline," I see some serious potential there. It's extremely bullish, and, just as important, I see the average volume index is on the rise, which tells me the stock is "in play" as it approaches that MA20.
Monday's movement has been very bullish, with the stock up more than 2% at midday. A breakout here will trigger a buying frenzy - a "bullish volatility event" as the stock moves up above its tightened top Bollinger band.
So, here's what to do: Buy BTEGF shares up to $3.30. Put a 10% trailing stop in place to protect your principal and your profits. I'm targeting a move up to $5 in the short term - that would take the stock out of "classic" penny stock territory and would represent about 65% in gains from Monday's opening price. When the stock hits $5, tighten up your stop - make it 5%.
Penny stocks are my favorite way to go after big windfall potential for small money, but like-minded investors cannot... should not... must not overlook cryptocurrencies. Yes, one Bitcoin will set you back more than 58 grand right now, but not a lot of folks know the serious profit potential is coming from very small coins right now - tokens trading for $10, even $5. Tom Gentile - my good friend and early crypto millionaire - has two of these coins "locked and loaded" today. He thinks these could 10X Bitcoin's performance over the year ahead, and he's got details on them here....
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About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Penny Hawk. He also contributes to Money Morning as the Quant Analysis Specialist.
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