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McAbby’s Found a New Lover! And She’s Got Gas! (SWN)

Posted on September 19, 2019

Today’s trade is a speculative play on a stock that’s been so hammered and persecuted and booted down the backside that no one’s even bothering to look at her any more.

You can dress her up in new clothes, slather on the makeup, sponge her down real good and spray on the perfume, but it won’t make a difference.

And that’s precisely why we’re in love…

Our little Guinevere works in a difficult space, friends – natural gas – so it’s no surprise she gets a wee bit trodden upon.

But, thankfully, things are looking up.

Full disclosure: the company’s called Southwestern Energy (NYSE:SWN), and she’s studiously avoided the siren call that many in her sector have succumbed to – expanding into the oil space.

Southwestern believes that by remaining one of the lowest-cost providers of natural gas in the U.S. market, they’ll best deliver value to their shareholders.

And we believe they’re about to do just that.

While she doesn’t trade with a dividend, she does sport a multiple of just 1.1 times last year’s earnings and is highly leveraged to gains in natural gas.

To wit – since Labor Day, while the price of gas rose by roughly 20%, SWN shares soared by 60%!

And that’s likely why mid-August saw three insiders purchase roughly $250,000 worth of the company’s shares.

Take a look now at the chart –

The breakdown’s like this –

  • First, SWN broke above a five month declining trendline some two weeks back and is now consolidating above the two dollar mark (circled, in blue).
  • The breakout came on good volume after an extreme oversold reading registered at the end of July (in green).

We note that the weekly chart also shows a deeply oversold signal occurring in late August, adding weight to the bull case (not seen here).

  • And finally, MACD just surfaced above her mid-way waterline (boxed, in red), thus confirming RSI’s move of two weeks ago.

In short, this little billion dollar company (by market cap) has begun a move.

And because the shares are so cheap, they offer immediate profit potential by way of a

That’s a 49% return.

In three months.

And that’s my girl…

Many happy returns,

Matt McAbby

 

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