|
1) EP (El Paso Corporation, Natural Gas Utilities), $7.59 - Buy. We kick off this week's Fresh Picks with an old friend, EP. El Paso Corporation is a North American provider of natural gas services. The Company has core businesses in natural gas production, gathering and processing, and transmission, as well as liquefied natural gas transport and receiving, petroleum logistics, power generation and merchant energy services. From its February low of $3.33, EP enjoyed a meteoric 200% run that lasted through early June before an inevitable correction took hold. The downtrend took EP first to a July low of $7.75, and then an August low of $6.86. From there, however, EP has turned higher, flashing a nice reversal buy signal on its OHLC chart with four consecutive up-days on improving buy-side volume that moved the stock back above its 200-day MA of $7.45, and important technical hurdle we needed to witness before getting on board. Next up is the 50-day MA of $8.26, with a successful breach of this level leaving the door wide open for a move back to the July high of $9.88. The MACD has turned higher now and is sitting right at the line. EP is still a formidable revenue generator- for the three months ended March 31, revenues rose 7% to $4.02 billion. One thing to be cautious of here is the upcoming EP earnings announcement scheduled for Aug. 13. As we all know, anything is possible with numbers, and market reaction is often extreme in either direction. Look to the 50-day MA as an initial target here, and keep a conservative stop in place. Short term target price: $8.40 (11% gain). Stop limit: $7.10 (6% loss).
2) GPK (Graphic Packaging International Corporation, Containers and Packaging), $3.99 - Buy. Our risky spec play this week comes in the form of GPK, a beaten and battered containers and packaging stock that hit rock-bottom on Friday, setting a new 52-week low-water mark of $3.99. Graphic Packaging International Corporation is a manufacturer of packaging products used by consumer product companies as primary packaging for their end use products. The Company is strategically focused on the folding carton segment of the fiber-based product packaging industry. The Company sells its products primarily to major consumer product manufacturers in non-cyclical industries such as food and beverage providers. The chart on GPK resembles the predictable rising and setting of the sun, with peaks and troughs running in one-to-two month cycles. The company last week announced the approved merger with packaging rival Riverwood Holding, Inc. The Company, which has an enterprise value of approximately $3.2 billion, expects substantial free cash flow for debt reduction. For the six months ended June 30, revenues increased 2% to $535.9 million. Net loss before accounting change applicable to Common fell 52% to $3.3M. The one concern in catching this falling knife was the price action on Friday into the close, with the stock finishing at its absolute intraday low. This leads us to look to enter the trade cautiously as there could be follow-through selling at the open on Monday. As we always say with these bounce plays, look closely at the early action on Monday for signs of buy interest before entry. You want to be relatively comfortable that the stock is not headed lower, especially here where there is no built-in support at all. If the stock turns higher, looks to use Friday's low as a gauge for your stop-loss trigger. Based on the past chart cycles, we like the looks of this one as a rebound pick, but again, choose your entry point carefully. Look to the July low of $4.50 as an initial target. Short term target price: $4.50 (13% gain). Stop limit: $3.70 (7% loss).
3) SGR (The Shaw Group Inc., Misc. Fabricated Products), $6.97 - Buy. We close out the week with another oversold pick, this one also setting a three-year low on Friday after reaching a July high of $12.65 just one month ago. Now with a share price about 50% leaner, we are looking for a bounce. The Shaw Group Inc. (Shaw) is a global provider of comprehensive services to the power, process and environmental and infrastructure industries. The Company operates three business segments: Integrated Engineering, Procurement and Construction (EPC) Services, the Environmental and Infrastructure and Manufacturing and Distribution. The Integrated EPC Services segment provides a range of design and construction related services including design, engineering, construction, procurement, maintenance, piping system fabrication and consulting services, primarily to the power generation and process industries. The Environmental and Infrastructure segment provides services that include the identification of contaminants in soil, air and water and the subsequent design and execution of remedial solutions. Through the Manufacturing and Distribution segment, Shaw manufactures specialty stainless, alloy and carbon steel pipe fittings for use in pipe fabrication. Not the sexiest of businesses, we agree, but one that we feel comfortable playing as a bounce off its lows. Similar to GPK, though, the stock didn't look all that strong at the close Friday, although it did manage to crawl back a bit from its intraday low. Sell-side volume has been huge for the week, and we would like to see that slimmed down a bit before getting too excited, but we feel the time is near. The stochastic of course shows the reality of the current trend, with the stock buried deep in oversold territory. With a fairly low float of 34 million shares, and institutions holding roughly 80% of that, the actively traded shares are slim, and as of July 8, 20% of the float was being shorted, which would look to equal most all of the retail shares. So, considering the stock is at 3-year lows, we would hope those shorting the stock would be looking to cash in on big gains here. Such a short-covering eruption could trigger a sizeable squeeze that could take the stock higher quickly. But, like GPK, there is risk of further downside here with no built-in support other than Friday's low, so use caution. Often, the trades with the highest potential for rapid returns also carry the greatest risk for loss. Short term target price: $8.14 (17% gain). Stop limit: $6.55 (6% loss).
As always, do your own research before buying or selling any security. Our recommendations are for informational purposes only and are only our opinions. Make sure to read our Disclaimer
|
