Outside of the recent Elon Musk and Crypto saga lies a massive shift within one of the most important commodities that affects our everyday lives; Natural Gas. Henry Hub futures for June gapped up on Monday as the price managed to top $3.00/MMBtu for the first time since February of this year (using a rolling contract). While this doesn’t necessarily mean everyone’s power bill will be more expensive next month, it has more direct ramifications for companies not only trading this commodity, but for the producers and end users as well.
With this in mind, after sifting through our numerous watchlists and screeners, with this massive price appreciation in natural gas, we figured it’s time to break the mold of headlines that are currently dominated by crypto micro caps and bring you something that lies within a different industry; energy. While there were quite a few companies that floated to the top of the list, only one stood out as the most intriguing from our point of view; Tellurian Inc. (Nasdaq:TELL). Tellurian caught our eye after the stock rallied to close at $2.46/share (+11.31%) on Monday, leaving little doubt to market participants that a potential bull run could be in the making. Now before we dive into the trading strategy for this stock, first we thought it would be best to give you a bit of background on the company itself.
Background:
Tellurian Inc. is a US-based independent oil and gas exploration and production company. It is developing a portfolio of natural gas production, LNG marketing, and infrastructure assets that includes an LNG terminal facility and related pipelines. The company generates maximum revenue from Natural gas sales.
TELL Trading Strategy:
In order to not miss out on any continuation of the recent momentum we have seen, we like the entry at Tuesday’s open. With regards to support, we have a decent number of key levels after the pullback we saw in March and April. Up first, we have support just under the mental level of $2.00 flat, hovering around $1.95. This level served as support numerous times in recent weeks, and is also the potential neckline for the inverse head and shoulder pattern that might be forming. Aside from that level, we have the 100-day SMA that could serve as dynamic support as it has done in recent months. This indicator is currently at $1.72 at the time of writing. The final level of support should there be a systemic selloff would be the April low of $1.62, which served as a strong reversal point after the price came into contact with its 100-day SMA at that level. In order to give us some breathing room, we have set our stop loss at $1.60/share.
As far as resistance is concerned, there are really only three levels worthy of note. Up first is the March 15th high of $3.01, which paired with the proximity to the round $3.00, could create some consolidation. Following this level leaves quite a bit of room to run, as the next key resistance point isn’t until $4.13, which was the February peak before the pullback. Following pretty closely to this is the 52-week high of $4.39. After this, it’s nothing but blue skies until getting near its pre-COVID trading range. With that in mind, we have set our price target at $5.00/share.
With these risk parameters in place and using Monday’s close of $2.46/share as the proxy entry price, this play is shaping up to have +103.25% upside while risking -34.96%. We anticipate the move occurring within the next six to seven months.
