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How to make money off a crazy energy stock

It's been a wild ride for shares of Southwestern Energy.

After falling as much as 25 percent in the first few months of the year, the stock has ridden crude oil and natural gas prices for a massive comeback, and as of Wednesday's opening, price has doubled in 2016.

"This is a volatile animal," said Rich Ross, head of technical analysis at Evercore ISI.

However, Ross believes Southwestern Energy could actually be an attractive buy. He points out that the stock's 50-day moving average has crossed above its 200-day, which is often taken as an indicator of positive momentum.


In addition, he believes the crude oil and natural gas charts have turned around for good, which should certainly help shares of the energy company.

His advice, then, is that "you can buy this stock — but buy a smaller amount than you might typically buy of a larger, less volatile stock."

Amazingly, Southwestern Energy has been more than twice as volatile as the crude oil commodity over the past 20 days, and traders aren't expecting the stock to get any less volatile in the days ahead.

Dennis Davitt, portfolio manager at Harvest Volatility Management, agrees that the stock's upward momentum is a bit of a self-fulfilling prophecy.

"There's a large contingent of momentum trading strategies out there," and funds pursuing such strategies appear to be pouring into the stock, Davitt said.

In addition, with crude oil turning higher, the chance of energy bankruptcies appears to have decreased, which lessens a key force behind the stock's rising short interest — the hedging desires of funds already long energy company bonds.

These "structural changes" could well support the stock in the near future, according to Davitt.


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Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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