When it comes to entering a stock hitting a 52-week high, I prefer to look for ones hitting a “NEW” high. To me, his would be a stock that hasn’t hit a new 52-week high in quite some time. In addition, and more importantly, I want the stock to have broken through a key area of resistance. This way I know that it wasn’t just any move higher, it was a key breakout. One such stock that fits that description would be that of Anadarko Petroleum Corporation.
Anadarko Petroleum Corporation is an independent oil and natural gas exploration and production company. Anadarko’s portfolio of assets includes positions in onshore resource plays in the Rocky Mountains region, the southern United States and the Appalachian basin. Anadarko operates in three operating segments: oil and gas exploration and production, midstream, and marketing. Oil and gas exploration and production segment explores for and produces natural gas, crude oil, condensate and natural gas liquids. Midstream segment provides gathering, processing, treating and transportation services to Anadarko and third-party oil and gas producers. It owns and operates natural gas gathering, processing, treating and transportation systems in the United States. Marketing segment sells much of Anadarko’s production, as well as hydrocarbons purchased from third parties.
To review Anadarko Petroleum’s stock, please take a look at the 1-year chart of APC (Anadarko Petroleum Corporation) below with my added notations:
APC has been trading mostly sideways for the majority of the year, while running into resistance at $85 (red). That $85 resistance meets my definition of a clear resistance level that would signify an important 52-week high breakout if APC could manage to break above it. IF that were to happen, the stock would probably be heading higher, most likely on a new uptrend.
The Tale of the Tape: APC has formed a key resistance level at $85, which would be a 52-week high breakout if APC could break above it. A long trade could be entered if APC breaks above $85, with a stop set below that level. If you are bearish on the overall market and/oil in general, you could also short APC at $85 if the stock happens to get there.
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