PreMarket Prep Stock Of The Day: Amplify Energy Corp

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

Whether you are a long-term investor, swing trader or even a shorter-term trader that holds positions overnight, news can make or break you. When holding positions over the weekend, there are two possible days of breaking news that could disrupt your trading plan.

An excellent example of this dynamic is taking place in shares of Amplify Energy Corp AMPY, which is the PreMarket Prep Stock Of The Day.

The Company: Amplify Energy Corp is an independent oil and natural gas company engaged in the acquisition, development, exploitation, and production of oil and natural gas properties in the United States. Its properties consist of mature, legacy oil and natural gas fields.

The assets primarily consist of producing oil and natural gas properties located in Oklahoma, the Rockies, federal waters offshore Southern California, East Texas/North Louisiana, and Eagle Ford.

Two-Week Move On No News: After ending the Friday, Sept. 17 session at $4.18, the issue had a small down day, then a smaller up day, and ended the Sept. 21 session at $3.87.

From that level, it embarked on an eight-day rally, with the high of the move ($5.78) and the high close of the move ($5.75) coming in Friday’s session. The high was just shy of its February 2020 high of $5.89.

The Bad News: With the boat fully loaded with momentum longs, the issue upended these investors over the weekend. That news being an oil rig operated by the company was responsible for an oil spill at Beat Field, which is off the coast of southern California. In response to the spill, the company has suspended production and pipeline operations at the facility.

PreMarket Prep Take: When the issue was being covered on the show, it was trading at the $2.30 area and the premarket low ($1.85) had already been established. Dennis Dick reiterated a familiar saying on the show: “Fundamentals trump the technicals and this is no better example of that. Just throw the technicals out the window."

The author of this article attempted to inject some technicals into the chaos. A major buyer(s) at $2 and under was identified based on the premarket price action in the issue.

On the upside, it was hard to predict where a rally would end. The reason being, shorter-term traders not already long the issue may be willing to buy shares at such a discount to last week’s price and scalp out long before the issue even reached the bottom of Friday’s range ($5.37).

Price Action: The issue continued to rebound in premarket trading and opened well above the premarket low at $2.88, which turned out to be only $0.09 from the current low. The follow-through rally took the issue to $3.61 and then reversed course. After being halted for trading, the stock sits around $1.56 per share at publication time.

Moving Forward: It may be tempting to attempt to go long the issue and hope that extent of the spill is not that severe and the company does not face any lawsuits that may result from it.

However, if one is to use precedence to guide their investment decision, there is one chart to take a look at. In April 2010, when the Deepwater Horizon oil spill occurred, BP BP was trading at the $60 area. After the recent two-week rally in the issue, it has moved up from the $25 area to trade over $28 in Monday’s session.

Photo: Sebastian Voortman from Pexels