Rosetta Resources Inc., an independent exploration and production company, acquires and develops onshore energy resources in the United States. It owns producing and non-producing oil, natural gas liquids (NGLs), and natural gas properties in proven or prospective basins that are primarily located in the Eagle Ford shale in South Texas and in the Permian Basin in West Texas. As of December 31, 2014, the company owned approximately 64,000 net acres in South Texas and 57,000 net acres in West Texas; and had proved reserves of 282 million barrels of oil equivalent that comprised 68 million barrels of crude oil and condensate, 105 million barrels of NGLs, and 655 billion cubic feet of natural gas.
Take a look at the 1-year chart of Rosetta (NASDAQ: ROSE) below with added notations:
After a long decline from June until December, ROSE has been trading sideways during the most recent 5 months. While in the sideways move, the stock has formed a common pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern.
ROSE’s rectangle pattern has formed a resistance at $25 (red) and a $16 support (green). At some point the stock will have to break one of the two levels.
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The Tale of the Tape: ROSE is trading within a rectangle pattern. The possible long positions on the stock would be either on a pullback to $16 or on a breakout above $25. The ideal short opportunity would be on a break below $16.
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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