Today’s Big Stock: Devon Energy Corporation (NYSE: DVN)

Devon Energy Corporation is an independent energy company engaged in the exploration, development and production of oil, natural gas and natural gas liquids. Devon’s operations are concentrated in North American onshore areas in the United States and Canada. It also owns natural gas pipelines, plants and treatment facilities in many of its producing areas. Devon is engaged in the commercial development of natural gas from shale and coaled formations, and it is a using steam to produce oil from the Canadian oil sands. During the year 2011, the company drilled 1089 wells in the United States and 1045 wells in Canada.

Please take a look at the 1-year chart of DVN (Devon Energy Corporation) below with my added notations:

Over the last 8 months, DVN has formed a couple of important price levels to watch. First is the $70 level. As you can see from the chart above, $70 was a key resistance (red) in August and November. As expected, that same $70 level has now become support (green). Also worth noting is the up trending support level (blue).  Any (2) points can start a trendline, but it is the 3rd test and beyond that confirm its importance. This level has been tested (4) times and seems to be approaching $70 as well.

The Tale of the Tape: DVN has formed an important price level at $70. A long trade could be placed on any pullbacks to the $70 level with a stop placed under that level. IF the stock were to break below $70, a short trade would be advised with a stop placed above the level.

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