Today’s Big Stock: Nabors Industries Ltd. (NYSE: NBR)

Nabors Industries Ltd. is a land drilling contractor and a land well servicing and work over contractor in the United States and Canada. The company markets approximately 550 land drilling rigs for oil and gas land drilling operations in the United States Lower 48 states, Alaska, Canada, South America, Mexico, the Caribbean, the Middle East, the Far East, Russia and Africa. As of year end 2010, the company marketed approximately 555 rigs for land well-servicing and work over work in the United States and approximately 172 rigs for land well-servicing and work over work in Canada.

To analyze Nabor’s stock for potential trading opportunities, please take a look at the 1-year chart of NBR (Nabors Industries, Ltd.) below with my added notations:

 

 

While seemingly bottoming out from August until January, NBR formed a strong level of resistance at $20 (navy) and a very common level of support at $16 (green). In the middle of February, the stock broke above the $20 resistance. Now that the stock appears to be pulling back, the $20 level should act as support. If the stock doesn’t pull back, a move above the $22.50 (blue support/red resistance) level could be a sign of another leg up for the stock.

The Tale of the Tape: NBR is currently trading between its levels of $20 and $22.50. A long position could be entered on a pullback to $20 or on a break above $22.50 with a stop placed below the level of entry. A short trade could be made on a break below the $20 in expectation of a fall back down to $16.

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