As the market has rallied from the beginning October, some stocks have managed to get back up to their respective August breakdown points, or even higher. Those previous breakdown levels will usually provide strong resistance when approached and strong support if stocks get back above them. One stock that has hit a couple of breakdown levels, and even broke above one of them, would be that of Complete Production Services, Inc.
Complete Production Services (CPS) provides specialized completion and production services and products that help oil and gas companies to develop hydrocarbon reserves and enhance production. The company operates in basins within North America, and manages its operations from regional field service facilities. CPS operates through three business segments. Through its completion and production services segment, the company establishes, maintains and enhances the flow of oil and gas throughout the life of a well. Through its drilling services segment, it contract drilling and specialized rig relocation and logistics services. Through its product sales segment, the company provides oilfield service equipment and refurbishment of used equipment through its Southeast Asian business, and provides repair work and fabrication services for its customers at a location in Gainesville, Texas.
Before discussing potential trading opportunities, please take a look at the 1-year chart of CPX (Complete Production Services, Inc.) below with my added notations:
As you can see from the chart above, CPX has a very common price level at $30 (navy). The stock also has a frequent level at $35 (red & green). Both of these levels broke in August and the stock moved lower as one would expect. Since bottoming in October, CPX has rallied to break back above the $30, but now the stock has been sitting under the $35 level for a couple of weeks.
The Tale of the Tape: CPX has broken back above its $30 level and now sits under the $35 level. A long trade could be made on a break above $35 or on a pullback down to $30. Short traders could enter a trade at $35 or on a break back below $30. Stops should be placed under the level of entry on longs or above the level of entry on shorts.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT