How to Trade Shell After Record Profits in Q2
Earnings season is well underway, and oil and gas companies have undoubtedly been stealing much of the limelight so far.
This should come as little surprise, as high energy prices continue to translate into record profits for many oil and gas majors in the second quarter. Last week, it was Shell’s turn to announce Q2 earnings, and they didn’t disappoint shareholders.
Learn how, and why, to trade Shell stock below.
|Symbol for Invest.MT5 Account:||SHEL.UK|
|Date of Idea:||2 August 2022|
|Time Line:||6 - 12 months|
|Position Size for Invest.MT5 Account:||Max 5%|
- The Invest.MT5 account allows you to buy real stocks and shares from 15 of the largest stock exchanges in the world.
All trading is high risk and you can lose more than you risk on a trade. Therefore, you should never invest more than you can afford. Start small to understand your own risk tolerance levels or practice on a demo account first to build up your knowledge before investing.
Why Buy Shares in Shell?
It is no secret that energy prices are high right now.
Concerns around the global supply of oil and gas, which was already struggling to keep up with demand at the beginning of the year, have been made worse by the ongoing conflict in Ukraine. This has resulted in oil and gas trading at their highest levels for a long time.
These rising prices have contributed a lot to the high levels of inflation we are currently seeing throughout the world. They have also resulted in large profits for oil and gas companies, such as Shell.
Last week, Shell released their second quarter results, in which they reported record breaking profit, which more than doubled year on year. Their previous quarterly record had only been set three months previously, in Q1 this year.
Whilst Shell decided to hold its dividend steady in Q2, it did announce a new $6 billion share buyback programme, which follows $8.5 billion worth of buybacks concluded in the first half of the year.
Share buybacks are popular amongst investors as, like dividend payments, they are a means of returning excess cash to shareholders – often, in a more tax-efficient way.
By creating demand, companies are applying upward pressure to their share price, whilst simultaneously reducing the number of shares in circulation, which further reinforces the upward pressure on price.
There are many things which are uncertain about the current economic outlook, however, as long as oil and gas prices remain elevated, we can expect producers such as Shell to continue to achieve strong results.
Nevertheless, the prospect of an economic downturn in the near future cannot be ruled out, particularly after the US reported its second consecutive quarter of negative growth last week.
The prices of commodities such as oil and gas traditionally have a strong positive correlation with economic growth. Meaning that when the economy contracts, oil and gas demand usually suffers. Therefore, anyone considering buying Shell stock will need to weigh this risk carefully against the potential benefits.
Shell Stock Forecast - What Do the Analysts Say?
According to analysts polled by TipRanks for a Shell stock forecast in the past 3 months, there are currently 14 buy, 1 hold and 0 sell ratings on the stock. The highest price level for Shell’s stock forecast is 3,200p and the lowest price target 2,025p.
The average price forecast for Shell’s stock is 2,726.86p which represents more than 26% upside from levels at the time of writing.
An Example Trading Idea for Shell Stock
An example trading idea for the Shell share price could be as follows:
- Buy the stock on a break above 2,200p to allow for current market volatility.
- Target just below the average analyst price target at 2,726p.
- Keep your risk small at a maximum of 5% of your total account.
- Timeline = 6 – 12 months
- If you buy 100 Shell shares:
- o If target is reached = £526 potential profit (2,726p – 2,200p *100 shares).
It’s important to remember that the share price is unlikely to go up in a straight line and it may even go much further down before it rises, if it rises at all. This is especially true at the moment considering the level of uncertainty and volatility in global stock markets.
Therefore, be sure to exercise good risk management, which is one of the most important aspects of successful trading. You should always know how much you could potentially lose on a trade and what the risks involved are.
Another factor to consider is the commission, which can eat into your profits. With the Admirals Invest.MT5 account, you can buy Shell stock with a commission of 0.1% per share, and a minimum commission of 1p.
How to Buy Shell Shares in 4 Steps
With Admirals, you can buy shares in over 4,300 companies, including Shell, at competitive terms. In order to buy Shell stock, follow these 4 steps:
- Open an Invest.MT5 account with Admirals to access the Trader’s Room.
- Click ‘Invest’ next to one of your live or demo accounts to open the web platform.
- Search for your stock at the bottom of the Market Watch window and drag the symbol onto the chart.
- Use the one-click trading feature, or right-click and open a trading ticket to input your trade size, stop loss and take profit level.
Click on the banner below to buy Shell stock today! ▼▼▼
Do You See the Shell Stock Price Moving Differently?
Remember that all analytics and trading ideas are based on the personal view and experience of the author.
If you believe there is a higher chance Shell’s share price will move lower, then you can also trade short from a CFD (Contracts for Difference) trading account which Admirals also provide.
This means you can trade long and short to potentially profit from rising and falling stock prices. Learn more about CFDs in our ‘How to Trade CFDs’ article.
INFORMATION ABOUT ANALYTICAL MATERIALS:
The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admirals’ investment firms operating under the Admirals trademark (hereinafter “Admirals”) Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admirals shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
- With a view to protecting the interests of our clients and the objectivity of the Analysis, Admirals has established relevant internal procedures for the prevention and management of conflicts of interest.
- The Analysis is prepared by an independent analyst Roberto Rivero, Freelance Contributor (hereinafter "Author") based on personal estimations.
- Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admirals does not guarantee the accuracy or completeness of any information contained within the Analysis.
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- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.