The market is in flux.
Here is the Russell 2000, the index of small cap stocks.
Historically, small caps have led the market both up and down…
The chart pattern shows a head and shoulders pattern followed by a death cross (share price crossing 100-day moving average).
Both of these are bearish patterns — and were proven correct in this case. There is more support at 710, but we have yet to get there.
The DJIA, NASDAQ, DAX, Shanghai, and most other major markets are acting in a similar fashion… but as they say, “There is always a bull market somewhere.”
Last week I made the bullish argument to buy silver. This week I’ll give you a safe haven to put your money so you can sleep at night.
The Safe Stock
The biggest change in the world today isn’t Greece or the employment number. It’s the price of oil.
Brent Crude just fell below $100 for the first time in more than six months. On Friday, WTI hit $82.50.
Agricultural stocks have also taken a big hit. The Agribusiness ETF (MOO) is down about 16% in the past two months.
This sets up those companies that have commodities for a cost center.
To get some ideas on who will benefit, let’s see what stocks are hitting new 52-week highs today…
We have the normal mix of one-off biotechs like Medtox Scientific (MTOX), iPhone-driven rumor stocks like Vringo (VRNG) and AuthenTec (AUTH), as well as buyouts like Market Leader Inc. (LEDR) and lawsuit settlements.
Understanding 52-Week Highs
Don’t get me wrong; I love these types of “gap-up” trades.
But they tend to be small caps that are hitting new highs based on one-time events.
The trick to playing these stocks is to buy the rumor and sell the news. The smart money bought these stocks months ago. They are dropping them into the news-driven frenzy today.
What we are looking for is organic change — bellwethers, if you will — and one stock sticks out: Duke Energy Corp (DUK).
Reverse Death Cross: Duke Crosses above 100 DMA!
Duke produces electricity. Oil, coal, and natural gas go in, electricity comes out.
Oil is dropping in price. Natural gas and coal are dirt cheap. Plus, rates are going up in states like North Carolina.
Duke operates primarily in North and South Carolina, central and southwestern Ohio, north central and southern Indiana, and northern Kentucky.
This covers the new manufacturing hub of the United States and is littered with auto manufacturing such as BMW’s plant in Spartanburg, South Carolina.
Car sales were up 26 percent this past May — the best May since 2008.
This means higher demand for electricity.
Biggest, Best
Duke is currently merging with Progress Energy, Inc., which will make it the largest U.S. utility provider with more than 7.1 million customers. This merger will go through on July 8, 2012.
Despite the decade-long whipsaw in stocks, if you had held for the last ten years, $100,000 would have turned into $165k — and that’s if you didn’t reinvest the dividend.
Today Duke pays out a 4.5% dividend and has a five-year dividend average of 5.3%.
That’s a dividend that beats the heck out of the ten-year T-Bill, which is sitting at all-time lows.
The company has a modest debt-to-capitalization ratio of 44% and sits on $2.1 billion in cash.
If you are looking for a safe place to hide while the world comes apart at the seams…
If you don’t care about Greek unions or Chinese slowdowns…
Then Duke Energy is for you.
Be safe and prosper,
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
