Unusual Pattern of the Day: Shanghai Petrochemical (SHI)
Shares of Chinese energy firm Shanghai Petrochemical (SHI) have been on a strong uptrend the past few months. While there has been some daily volatility, a key indicator just signaled that shares are likely to head higher.
That sign? A golden cross. That occurs when a stock’s 50-day moving average moves over a company’s 200-day moving average. Even better, markets are still skeptical about foreign stocks and energy plays, even after both have started to move higher. That’s a psychological sign that there’s still also a lot more room to rally too.
Coming off a tough year for energy prices, the company isn’t currently profitable. However, earnings have doubled in the past year, and the company is nearing profitability at six time forward earnings.
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He's warning the "mother of all crashes" is coming.
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Action to take: Investors can buy here and grab a hefty 6.9 percent dividend yield. Shares are now about flat over the past year, so there’s still some room for a rally to catch up with the rest of the market.
Currently, there are no options to trade on this stock, but given its market cap, that could change in time. In the meantime, buyers can still look for double-digit upside in the next few months as the uptrend continues and grab income along the way to pay for options trades elsewhere.