Flotek Industries, Inc. develops and supplies oilfield products, services, and equipment to the oil, gas, and mining industries in the United States and internationally. Its Energy Chemical Technologies segment designs, develops, manufactures, packages, and markets specialty chemicals used in oil and gas well drilling, cementing, completion, stimulation, and production. The company’s Consumer and Industrial Chemicals Technologies segment develops, manufactures, and processes citrus oil products for the flavor and fragrance, and specialty chemical industry, as well as for beverage and food companies, and companies providing household and industrial cleaning products. Its Drilling Technologies segment manufactures, sells, rents, and inspects down-hole drilling equipment used in energy, mining, water well, and industrial drilling activities, as well as provides specialized equipment for drilling, completion, production, and work-over activities. The company’s Production Technologies segment assembles and markets production-related equipment, including the Petrovalve product line of rod pump components, electric submersible pumps, gas separators, and valves, as well as provides services that support natural gas and oil production activities.
Take a look at the 1-year chart of Flotek (NYSE: FTK) below with added notations:
FTK had been testing new highs in October before the market poorly received a piece of company news. Then, over the most recent two months, the stock had 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.
FTK’s rectangle pattern had formed a $12 resistance (red), and a $10 support (green). At some point, the stock had to break one of those two levels, and last week FTK broke the $10 support.
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The Tale of the Tape: FTK broke down from its rectangle pattern. The ideal short opportunity would be on a rally up to or near the prior $10 support. A break back above $10 could negate the forecast for a move lower.
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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