Traders and investors unimpressed with the latest round of China bashing could be eyeing energy and mining stocks.

With good reason. There’s potentially duplicate risk pricing in these sectors. Because the value of China imports and exports fell, concerns about the outlook pushed commodity prices lower. Energy and mining stocks fell even further, in expectation that commodity prices would continue their fall. The problem with the reasoning is that much of the fall in value of exports and imports was due to lower commodity prices – while the volume of trade increased in many cases.

This means that if oil and copper prices stabilise at current levels many resource share prices must rise to remove the discount for lower commodity prices. While  the Oilsearch's and Woodsides of this world will benefit, there may be much higher leverage to steady/higher oil prices via the smaller companies.

AWE fits the bill. Oil operations in the Bass Strait, off Tui, and in Texas, provide steady if unexciting income with reasonable well lives. Significant write downs hit the last result, but leave the balance sheet cleaner. The chart below shows positive momentum, a double bottom and a clear line in the sand at 74.25 cents. Woodside shareholders could be looking at a 20-40% revaluation. AWE shareholders could be looking at a 100% gain back to $1.50.

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