Looking To Be Long Energy? MTW
July 29, 2008 12:10 AM
I have harshly been critical of being long anything related to energy for far over a month and the market has proven my views correct, thus far, with a huge sell-off in energy related stocks. The energy ETF XLE has fallen 20% in 3 weeks, so my call on that sector has done well.
If you are looking to be long something energy related, Manitowoc (MTW) appears to be long after earnings- at some point. The PE is very low, but more importantly guidance was solid and we have chart confirmation to be long above $25.37. Unfortunately, it is likely to gap a bit higher at the open. If it gaps, watch the early high to make sure you aren’t buying into a reversal as a key SMA is near the likely open. But if you want to be long the space to hedge your bets on energy, MTW seems to be long here. I see no issues with the chart well into the $40 area. Therefore, I suspect it will attempt that area at some point.
Keep in mind, it could be tough sledding near term as the SMA’s are clearly pointed down. While I am not a huge follower of them, some people are. It could reject the $35 area and check down. If it stays above $32 range for several days and does reject an area first, then the trade will likely be long check-downs. I would rather wait until the reaction after earnings can be seen to be safe. But watching it intraday may solve that concern.
Keep in mind that I think the overall outlook on energy related stocks is a rotation out of them, in general. So it is unlikely there will be a hurry here, but not certain. What I am saying is “if” you like the sector and you disagree with my take on the sector in general, MTW is worth a hard look here.
Update: MTW reversed at the open and is an avoid until further notice, IMO. This is why I mentioned the safe play was to either wait, or watch the intraday open. It wasn’t good.
07/29 Close Update: My call to avoid it as the open was clearly sold was correct as it fell the rest of the day. I made the call within about 30 mins of the open and the stock was about $29 or so. It closed at $27.43. I understand that the sentiment is clearly negative on energy, but WLT rallying and MTW falling, makes no sense at all. MTW gave solid guidance, has a 7 PE and WLT has a PE in bubble territory. But I have long mentioned, if you think the markets are “efficient and rational” as taught in college, you would be strongly mistaken.
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MTW is getting plowed today. Still a buy above 25?
Hmm, I am not sure- possibly. I do not like the reaction acter earnings. Obviously sentiment is very negative on anything related to oil, in general. I personally do not see the problem with MTW. Earnings were strong. Guidance was strong. And they sold the open hard after earnings.