Todays Big Stock: Noble Energy Inc. Common Stock (NBL)

For today’s article I will be focusing on a stock that has broken out to a 52-week high. As a reminder, when it comes to 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.

Noble Energy, Inc. is an independent energy company, which is engaged in the oil and gas exploration and production worldwide. The company has operations in four main areas: the Central DJ Basin onshore United States; the deepwater Gulf of Mexico; offshore West Africa, and offshore Eastern Mediterranean. As of December 31, 2010, its main development projects included Central DJ Basin, Galapagos, Gunflint, Tamar, Aseng, Alen, Diega/Carmen, and West Africa gas projects.

Please take a look at the 1-year chart of NBL (Noble Energy, Inc.) below with my added notations:

Over the last 12 months, NBL has created a clear resistance at $100 (navy). That $100 resistance meets my definition of a clear resistance level that would signify an important 52-week high breakout if NBL could manage to break above it. Well, as you can see, the stock finally broke through that $100 resistance yesterday on a very large volume increase. The volume increase should add validity to the breakout.

 

The Tale of the Tape: NBL formed a key resistance level of $100, which was a 52-week high breakout when the stock broke above it. This should signal higher prices ahead for the stock. A long trade could be made on any pullbacks to the $100 level with a stop placed under $100. A break back below $100 would negate the forecast for the stock to move higher.

 

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!

Good luck!
Christian Tharp, CMT