Home » Watchlist Update: Turning to Energy and Bank Stocks In Search of Solid Setups

Watchlist Update: Turning to Energy and Bank Stocks In Search of Solid Setups

Although the major indexes made little progress last week, volatility is subsiding.

And we are beginning to see some stocks find traction in their breakouts.

Several names (primarily oil and gas stocks) made healthy moves higher from constructive setups.

For example, Continental Resources, Inc. (CLR), which was on last week’s Watchlist, broke out last Friday on high volume.

Shares were up 8% in the first hour of trading, although they did fade a bit into the afternoon session.

And in last week’s members-only Alpha Stocks class, we reviewed Arch Resources, Inc. (ARCH), which broke out this past Tuesday.

The stock jumped as much as 11.8% in just two days before pulling back.

If these breakouts can hold up and advance further, we may begin to see a healthier environment in which breakouts have a high rate of success.

But I still need to see follow-through before getting aggressive on the long side. 

Now, I mentioned last week that most of the names with good technical setups and tight pivot areas are small banks and energy stocks.

Yes, energy stocks carry risks related to the price of oil and natural gas, and banks don’t always make the strongest breakouts.

However, the three new stocks on this week’s Watchlist fall into those two categories, as those are simply where the best potential trades are currently setting up.

And as long as we can keep our stops relatively tight, we should be able to navigate these setups in a profitable way.

Weatherford International plc

First up is Weatherford International plc (WFRD), a $2.3 billion oilfield services company operating out of Houston, Texas.

This company provides the equipment and services that oil exploration and production companies need for their drilling and other operations.

Here’s how the chart is setting up…

Daily Chart of Weatherford International plc (WFRD) — Source: TC2000

And here’s how the stock is setting up with my Stock Surge Indicator (SSI):

  • Surge score: 99/100
  • % Above 52-wk low: 160%
  • Sales growth: +17%
  • Triple momentum: yes

The setup in WFRD is almost identical to last week’s chart of Continental Resources, Inc.

It is forming a textbook cup and handle pattern and showing tremendous strength in an otherwise weak market.

Notice how the relative strength line has turned up and made a new high.

If price tightens up for a few more days, the setup will look even stronger.

SilverBow Resources, Inc.

SilverBow Resources, Inc. (SBOW) is one of those oil exploration and production companies I just alluded to above.

This $400 million company is also based in Houston, and it focuses on acquiring and developing its land assets in the Eagle Ford shale region of South Texas.

Here’s how the chart is setting up…

Daily Chart of SilverBow Resources, Inc. (SBOW) — Source: TC2000

And here’s how the stock is setting up with my SSI:

  • Surge score: 99/100
  • % Above 52-wk low: 331%
  • Sales growth: +117%
  • Triple momentum: yes

SBOW is setting up for a “cheat entry” near the middle of its cup formation.

Unfortunately, the low of the shakeout move in January is too far away to use for a stop.

Therefore, I suggest using an arbitrary stop loss of somewhere around 6%-8%.

Look for a move above $25.55 as the entry trigger.

Preferred Bank

Preferred Bank (PFBC) is a $1.2 billion independent commercial bank operating out of Los Angeles, California.

Its operations are primarily focused on providing banking services to small and mid-sized businesses as well as other entrepreneurs, real estate developers and high net worth individuals.

Here’s how the chart is setting up:

Daily Chart of Preferred Bank (PFBC) — Source: TC2000

And here’s how the stock is setting up with my SSI:

  • Surge score: 96/100
  • % Above 52-wk low: 63%
  • Sales growth: +3%
  • Triple momentum: yes

I don’t often trade these small local bank stocks, but there is a proliferation of setups across this sector.

When I sort my stock scans by relative strength, the list is almost exclusively energy and bank stocks. So, I’ve decided to give this one a try.

PFBC kept its selloff contained to just 7% while most of the market was melting down last month.

Shares also bounced back quickly to their highs, which is a good sign of strength underlying accumulation.

The setup is pretty straightforward… Buy a new high, and place a stop beneath the swing low.

Before I go, you’d like a step-by-step walkthrough on how to best take advantage of trades like these…

Be sure to check out my recent article, How to Follow My Weekly Trades, to know where I’m buying so that you can follow along.

Embrace the surge,

Ross Givens

Editor, Stock Surge Daily

Ross Givens
Ross Givens

I bought my first stock when I was 12 years old. It was Microsoft. I’ve been a registered financial advisor. I’ve worked as a stock broker. I ran a managed fund. I was a Vice President at JP Morgan with Series 7, Series 66 and Series 3 securities licenses. I’ve been featured on Fox Business, CNBC, Bloomberg, and a bunch of other networks. The only thing I enjoy more than making money, is helping YOU make money.

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