Sometimes, a company story becomes so compelling, and earnings growth becomes so inevitable, that it's almost impossible to justify now owning some shares. For the United States Natural Gas Fund, LP (NYSE:UNG), Zhongpin Inc. (NASDAQ:HOGS), and Complete Genomics, Inc. (NASDAQ:GNOM) this isn't really one of those times. Yet, all three are setting up pretty big trading opportunities right now. Take a look.
The 7.4% pop today from Zhongpin Inc. is impressive. What's not impressive is how poorly HOGS seems to have followed through on equally-large rallies of late. When you take a step back and look at the longer-term picture though (like this weekly chart), it's pretty clear there's a bullish undertow now. The stock's above all of its key moving averages, and the moving averages are on the verge of bullish crosses of one another. Wednesday's rally may need to cool off first, but the bulls have been too persistent to ignore here.
HOGS is a Chinese meat and food processor, meaning it supplies food to consumer in China - not to U.S. consumers of Chinese food. The stock most likely got swept up in last year's mess exodus of Chinese stocks, and revenues continued to rise. Though earnings slipped a little, with a trailing P/E of 7.0 and a forward-looking one of 5.9, Zhongpin can easily justify higher share prices.
As for Complete Genomics, Inc., today's 42% surge is the result of an announcement the company made about a new - and clearly better - method for mapping human genomes. It couldn't have come at a better time. GNOM was already working on a major turnaround from last year's lull. Today's pop erases any lingering doubts about that effort, even if it's going to leave shares in an overbought condition... and ripe for a short-term pullback.
GNOM, as was implied above, is one of only a few biotech names working on recently-hot gene-mapping technologies, which could potentially be used as a diagnostic regimen in the near-term, and eventually be used to build therapies. The industry itself only started to drive meaningful revenue last year, and Complete Genomics was one of those names making it a viable business. Given the way it is and will accelerate, we can take this bigger rebound effort at face value... as a justified price appreciation.
Last but not least, the United States Natural Gas Fund, LP is not only not a small cap stock, it's not even a company. It is a trading instrument though, and more important than that, UNG looks like it's just become ownership-worthy. That's right - consider this a bullish call on natural gas.
There's little to argue with here. UNG has been getting drubbed since mid-2008, when everybody and their grandmother was getting into the natural gas business after new fracking techniques had opened up the door to a whole new world natural gas. The supply swelled, driving prices to the gutter. Nothing lasts forever though, and in this case, with a bunch of drillers and explorers shuttering gas operations because they sell it profitably, demand is finally starting to fade a little. The end result is a rising United States Natural Gas Fund.
The question is, how much more upside is there for the United States Natural Gas Fund, LP? The technical clues say a lot. For starters, we've just seen a higher high following a higher low for the first time since the first half of 2011. There's a difference between now and then, however. Then, there was no volume behind the move. Now there are tons of buyers. At the same time, UNG has doled out several bullish crosses of key moving averages in the last two months, for the first time in more than a year. Say what you want about supply and demand, but charts don't lie.