Golar LNG Limited is the owner and operator of liquefied natural gas (LNG) carriers and floating storage regasification units (FSRUs). As of mid-2010, Golar had a fleet of 13 vessels, 10 LNG carriers, three FSRUs and a 50% interest in a further LNG carrier. In June of ‘09, the company formed a wholly owned subsidiary, Golar LNG Energy Limited. By the end of 2009, it owned 73.8% of Golar Energy. Golar Energy specializes in the acquisition, ownership, operation and chartering of FSRUs and the development of liquefaction projects. In 2011, the company made the following acquisitions: Golar LNG Energy Limited (July), a floating storage and regasification unit Golar Freeze (October).
To review potential trading opportunities with Golar’s stock, please take a look at the 1-year chart of GLNG (Golar LNG Limited) below with my added notations:
After trending higher for well over a year now, GLNG has formed what appears to be a Double Top price pattern (blue). Double Tops are reversal patterns and are as simple as they sound: Rallying up to a point (T), selling off to a support, and then rallying back up again to approximately the same top (T). As with any price pattern, a confirmation of the pattern is needed. GLNG would confirm this pattern by breaking the $40 support (navy) that has been created by the Double Top pattern.
Keep in mind that simple is usually better. Had I never pointed out the Double Top pattern, one would still think this stock is moving lower if it simply broke through the $40 support level. So, whether you noticed the pattern or not, the trade would still be the same.
The Tale of the Tape: GLNG has formed a Double Top price pattern with a $40 support level. Although a long trade could be entered on a pullback to the $40, the price pattern seems to imply an impending break of support. If that happens, a short trade should be placed with a stop set above $40.
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