Welcome to your Fortune Research Weekly Watchlist, where I will give you some key stocks to watch every week… completely free.
My beloved New Orleans is windblown, soggy and without power… But thankfully, it appears to have escaped permanent scarring.
And because of that, it’s already shifted off of the front page of financial media in favor of familiar narratives like the delta variant and the crisis in Afghanistan. But we’re going to stay on the topic with our weekly watchlist…
I mentioned Monday that trading energy around hurricanes is usually simple. Go long the commodities leading up to landfall, then short the heck out of them afterward.
To navigate that transition, we need a benchmark to use as a guide.
The one I prefer to use is West Texas Intermediate crude oil, or WTI, which recently tried but failed to break through the $70 level.
Source: Bloomberg
If it can’t get turned around by the end of the week, both oil and gasoline appear to be solid near-term shorts heading out of summer demand and into refinery maintenance season, when demand typically declines.
On the other hand, if they actually break out to the upside — both have a strong negative correlation to the dollar, which is falling — it wouldn’t be out of the question to see a return to roughly $72 or $73 per barrel for WTI.
As such, we need to be ready to trade both ways.
Fortune Research Weekly Watchlist
*price at Tuesday’s open
On the long side, I suggest the United States Oil Fund ETF (NYSEArca: USO) and the United States Gasoline Fund (NYSEArca: UGA).
On the short side, there are two leveraged funds I prefer. The first is a commodity-only play, Proshares UltraShort Bloomberg Crude Oil (NYSEArca: SCO). The second is more producer-centric, the Direxion Daily S&P Oil & Gas Producer Bear 3X Shares ETF (NYSEArca: DRIP).
Now, I want to point out that natural gas has its own supply dynamics, and may not follow the broader trend in energy at all.
Although we’re headed into what we call the “shoulder season,” where cooler temperatures portend less demand, natural gas supply is incredibly tight.
And it may get even tighter if coal stockpiles at utilities get so low they have to idle those operations and burn pricey natural gas instead.
Source: Bloomberg
Because of that, we’re likely to see prices remain in the $3.80 to $4.50 range all throughout the fall, and short positions would be super risky.
For long positions, let’s focus on the U.S. Natural Gas Fund ETF (NYSEArca: UNG) and Marcellus Shale gas producer Southwestern Energy Co. (NYSE: SWN).
And, finally, I want to add one stock to the Fortune Research Weekly Watchlist that will likely be a key player in helping Louisiana recover from Ida’s wrath in the longer term. Armstrong World Industries Inc. (NYSE: AWI) is a Lancaster, Pennsylvania-based home improvement-focused company that sells ceilings, walls, roof deck and plasterform castings — all of which will be much-needed supplies during the upcoming rebuild.
I’ve compiled all seven in the graphic above, and I’m actively looking for a buy signal this week to send out a free trade!
So keep an eye on your inboxes, everyone. Now that summer’s over and all of the Wall Street bros are back at their desks, I have a feeling that trading volume is about to pick up.
Big time.
All the best,
Matt Warder
