Bonanza Creek Energy Inc (NYSE: BCEI)

Bonanza Creek Energy, Inc., together with its subsidiaries, operates as an independent energy company in the United States. The company is primarily engaged in the acquisition, exploration, development, and production of onshore oil and natural gas assets in the Wattenberg Field in Colorado and the Dorcheat Macedonia Field in Southern Arkansas. It also owns and operates oil-producing assets in the North Park Basin in Colorado; and the McKamie Patton Field in Southern Arkansas.

Take a look at the 1-year chart of Bonanza (NYSE: BCEI) below with my added notations:

1-year chart of Bonanza (NYSE: BCEI)

For the most part, BCEI has been trending lower for the last 7 months. However, during the most recent 4 months the stock has had a tendency to create key price levels at the increments of $5 (blue). For example, the current level of resistance is $30. Next, you can see that $35 was the previous support back in October and November, while recently the $20 and $25 levels have both been hit as either support or resistance.

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The Tale of the Tape: BCEI is approaching its key level of $30. A long trade could be made on a break above that level with a stop placed under it. A short trade could be made at $30 with the expectation of a fall down to the next $5 level at $25.

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

Follow me on Twitter: @cmtstockcoach