Energy Stock Pick – Pattern Trade

In the middle of last week, I found what I thought was a pretty strong case for pattern trading. Rather than post it here, I wanted to see if the stock would fall on Friday first, which would give even more credibility to the idea.

Well, it happened. As part of a Friday, holiday weekend, end-of-the-month selloff, the stock dropped. In after-hours trading, it gained 10 cents per share back. This stock could be poised for a nice upside.

Here’s the stock details and what I’m thinking of doing.

Stock Pick Details

Stock: Helix Energy Solutions Group (NYSE: HLX)

Market Cap: $1.14 billion

Summary: They operate as an offshore energy company—development solutions and contract solutions to energy market and their oil & gas properties.

52-week high: $17

52-week low: $8.76

Institutional Ownership: 77.19%

Insider Ownership: 8.07%

Average Volume: 2,641,140 (on Friday, volume jumped to 4,549,903)

1 Year Target Estimate: $21

EPS: 29 cents

Helix Energy Solutions Group Chart

Trade Thoughts

On Friday, the stock sold off and lost 6.92%. In fact, the sector as a whole was down almost 6%. I’m thinking that those wanting to get out did as the stock saw almost double the trading action ahead of the holiday weekend.

Also, look at the chart. I highlighted some things for you. First, notice the two almost identical trends in the circle area I highlighted. On Thursday I saw this and actually expected the stock to drop by a healthy amount, which it did.

Next, look at both arrows I put on the chart. You have almost an identical drop and both took place near the end of a trading month. Can we expect a similar bounce?

I’m looking for two things.

First, I want to see if the stock continues to drop. If it does, I think it will bounce back off the $10 round mark. I’m not positive it will continue to fall given the straight selloff on Friday. But if it does, I’ll watch it go all the way down and get in when it finds support.

Second, if it hangs around $10.80s, I want to see it hit $11 before taking a stab at making some money with HLX. It looks like an $11 to $13 run is possible. If we see another identical cycle, this stock could hit the $16-$17 range in 3-4 months, but I’m one to hold a stock for that long.

This could be just what I’m looking for to start June off on the right foot. Would do you think of this trade? I welcome your comments.