Oil hit a fresh two-year high this past trading week, reaching
upwards of $88 a barrel.
One way to profit from the current "black gold rush" is to find
growing oil companies that also pay attractive dividends.
Marine Petroleum Trust (Nasdaq:
is one of these gems.
Established in 1956 as a way to efficiently administer oil and
natural gas leases off the Louisiana shore, the Texas-based
offers a healthy 5.9%
As a royalty trust, the company receives revenue from its interests
in oil and gas wells and is legally required to distribute at least
90% of its distributable income (revenue less expenses) to
shareholders as distributions. Income and distributions vary mainly
based on changes in oil and natural gas prices and production
Technically, MARPS is sky rocketing. The stock is in a steep
accelerated uptrend and recently bullishly broke a multi-year
The base began forming in February 2009 as the stock formed a
downtrend line, falling from a high near $21 to a low of $12.71 by
Quickly rising off this low, the stock broke the downtrend line in
late 2009 and began forming a Major uptrend line.
Moving to a high of $17.81 by February 2010, MARPS encountered
resistance at this level. The stock fell once again to support
marked by the rising uptrend line, which was close to $14.
Forming a double-bottom near $14.24 -- between May and July 2010 --
a smaller basing pattern (labelled #2) was etched within the larger
basing formation (labelled #1).
Surging off this double-bottom, MARPS blasted through $17.81
resistance in early October 2010, forming an accelerated uptrend
line. Then after bullishly completing the larger basing pattern
this November, the stock soared through major resistance near $21
and is continuing to trend higher.
A small shelf of resistance has formed at the stock's recent high
of $23.88. However, for about the past three months, MARPS has been
riding its upper Bollinger band higher. If the stock can decisively
pierce its upper Bollinger band, it is not likely to encounter new
significant resistance until $34.29 -- a multi-year peak hit in
In September of this year, the rising 10-week moving average
bullishly crossed above the rising 30- and 40-week moving averages.
The 10-week moving average mirrors the steep accelerated uptrend
The indicators are bullish. In mid-August,
gave a significant buy signal near the zero level. The MACD
histogram is building in positive territory.
Relative strength index (RSI) has been in a major uptrend since
2009. At 74, it has has become overbought. However, strong stocks
can become and stay overbought for long periods.
and Williams %R, although overbought, are on buy signals.
Fundamentally, MARPS looks strong.
During the first-quarter of fiscal 2011 (for the period ending
September 30th), distributable income increased +21.8% due to
higher prices realized for oil and natural gas.
As a result, distributions to unit holders increased +48% to $0.37
from $0.25 in the comparable year-ago quarter. The trust may also
be on track to provide higher distributions in upcoming quarters.
Action to Take-->
Given that MARPS looks technically strong, and has increased
distributions, I plan to go long on the royalty trust by entering a
long position if the stock successfully breaks the small shelf of
resistance at $23.88.
I will, therefore, place a buy-on-stop order at $23.97. This means
if MARPS does not hit or go above $23.97, I will not enter the
My stop-loss is $20.25, below support marked by the completion of
the base pattern and the 10-week moving average. My target is
$34.27, near the 20-year high hit in October 2008.
The risk/reward ratio is: 2.77:1. Note: MARPS tends to trade with
thin volume, so if you are planning to take a large position, it
would be wise to scale into the stock.
-- Dr. Melvin Pasternak
Dr. Melvin Pasternak is one of the most experienced market
technicians in the nation and Chief Trading Expert behind
Double-Digit Trading. With more than 25 years
experience... Read more.
Disclosure: Neither Melvin Pasternak nor StreetAuthority, LLC
hold positions in any securities mentioned in this article.
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