Profit opportunities after signs of progress in EU-U.S. talks

In spite of Trump's long-standing threats to set tariffs on imports from the EU and especially on imported European cars, negotiations between the two countries show signs of progress. President Trump's administration has announced it will seek a swift approval of a deal with the EU from Congress. This may be the first step in the implementation of the agreement between Donald Trump and Jean-Claude Juncker: to remove any duties and subsidies on industrial goods traded between the two economies. Such an agreement would be an extraordinary stimulus for the EU and US economies.

While the details of the agreement are still unknown, the EU is expected to start buying more LNG from the United States. Currently, most gas in Europe is supplied by Russia through gas pipelines. Exceptions are Portugal and Spain, which have no access to gas pipelines and import gas from the United States. The gas is liquefied (thus its volume is shrunk), loaded onto tankers and shipped to Portugal or Spain where the liquid is converted to gas in the so-called regasification terminals. Hence, the gas is ready for use for heating and electricity.

Enagas (ENG.ES)

Enagas (ENG.US) is the largest energy company in Spain. The company operates integrated terminals for regasification and has infrastructure for natural gas distribution.

Weekly chart

In spite of the downward trend, RSI remains at high levels, which shows that the strength in upward movements is significant. Two examples of divergence are indicated by the yellow and orange dotted trend-lines. We will track the price for break outs above 24.75 and a completion of the inverse head and shoulders formation. Entry's above 24.75 is attractive: below this level there is support from the diagonal trend-line of the descending channel, as well as from Fibonacci 23.6% level.

Galp (GALP.PT)

A Portuguese company operating terminals for re-gasification and distribution of natural gas. At present, the company buys LNG only from Nigeria. The map, however, shows that the company also has a regasification terminal on the Atlantic, which makes imports of liquefied gas from the United States attractive.

Source: GALP Annual Report for 2017

Daily chart

Current price levels allow for entry at the bottom of the ascending channel. The price is further supported by 200-day MA and Fibonacci 38.2% support. After a strong sell-off in the last few days, DeMarker falls into oversold territory and is currently pointing upwards, which increases the likelihood of an upward movement in the price.

Source: Bloomberg Finance L.P.

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