EXCO Resources Inc. (NYSE: XCO)

EXCO Resources, Inc., an independent oil and natural gas company, engages in the exploration, exploitation, development, and production of onshore U.S. oil and natural gas properties with a focus on shale resource plays. The company holds interests in various projects located in east Texas, north Louisiana, Appalachia, and the Permian Basin in west Texas. As of December 31, 2011, it had proved reserves of approximately 1.3 trillion cubic feet of gas equivalent; and operated 7,872 wells. EXCO Resources, Inc. was founded in 1955 and is based in Dallas, Texas.

To review EXCO’s stock, please take a look at the 1-year chart of XCO (EXCO Resources, Inc.) below with my added notations:

XCO has formed a clear resistance at $8 (blue), which would also be a 6-month high breakout if the stock could manage to break above it. In addition, the stock is climbing a short term, uptrending support level (red) over the last 3+ months. These two levels combined have XCO stuck within a common chart pattern known as an Ascending Triangle. Eventually, the stock will have to break one of those levels.

The Tale of the Tape: XCO has an uptrending support and a clear $8 resistance level to watch. A long trade could be made on a pullback to the support, or on a breakout above $8. A break below the uptrending support would be an opportunity to enter a short trade.

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