Market Overview

Emerge Energy Services Continues Furious Rally

Emerge Energy Services Continues Furious Rally

In this wacky market, stocks can double or triple on little or news. Issues can also be sliced in half off a poor earnings report or failed drug trial.

With the sharp decline in Crude Oil since mid-2014, issues in the sector -- especially ones related to exploration or fracking -- were decimated. When the price of the Crude Oil was under $40 and closer to $30, it was simply not profitable for many of these companies to pull out of the ground. So much so that many were left dead by Wall Street and others were simply ignored when Crude Oil finally bottomed in January.

Many of the major oil and gas firms began to rebound well ahead of the commodity, but others were slow to respond.

Related Link: Emerge Energy Services On The Move

One such issue is Emerge Energy Services LP (NYSE: EMES), the producer of silica sand, which is a key ingredient for the hydraulic fracturing of oil and natural gas wells. In fact, as late as May 17, the company received a notice that the partnership wasn't in compliance with continuing listing requirements under the timely filing criteria for failing to file its quarterly 10-Q which may result in being delisted.

How things can change in a week. On May 26, a Morgan Stanley note circulated Wall Street outlining some bullish dynamics that may be a catalyst for the entire sector. Coupled with a steep increase in Crude Oil prices, that has sparked a rally in related issues.

There was a bit of a delayed reaction in shares of Emerge Energy Services. After hovering at the $5 level for days after the report, it finally responded. Since its June 2 close of $4.91, it has moved up to as high as $12.06 in Friday's session. It should be noted the move has been on steadily increasing volume and has traded 7 million shares today compared to its 20-day average of 1 million.

DA Davidson echoed this delayed action in Emerge Energy, stating, "[Emerge Energy] is one of the most undercovered of its peers as a small cap stock, has been a ‘catch-up' trade recently as it was a laggard for past 3 months."

The analyst reiterated there was no fundamental change in the company. Simply, Emerge's peers had rallied in prior months, and the higher beta play (Emerge Energy) was just catching up.


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