DCP Midstream Partners, LP owns, operates, acquires, and develops a portfolio of midstream energy assets in the United States. It operates through three segments: Natural Gas Services, natural gas liquids (NGL) Logistics, and Wholesale Propane Logistics. The company’s Natural Gas Services segment gathers, compresses, treats, processes, transports, stores, and sells natural gas. The NGL Logistics segment engages in producing, fractionating, transporting, storing, and selling NGLs, and recovering and selling condensate. The Wholesale Propane Logistics segment is involved in transporting, storing, and selling propane in wholesale markets. It serves retail and wholesale propane customers, refining and petrochemical companies, and NGL marketers operating in the liquid hydrocarbons industry. DCP Midstream GP, LP serves as the general partner of the company.
Take a look at the 1-year chart of DCP (NYSE: DPM) below with my added notations:
DPM has formed a clear support at $35 (green). In addition, the stock is declining against a short-term, down trending resistance level (red) over the last couple of months. These two levels combined have DPM stuck within a common chart pattern known as a descending triangle. Eventually, the stock will have to break one of those levels.
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The Tale of the Tape: DPM has a down trending resistance and a $35 support level to watch. A long trade could be made on a breakout through the resistance or on a pullback to $35. A break below the $35 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!
Christian Tharp, CMT
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