Rice Energy Inc., an independent natural gas and oil company, engages in the acquisition, exploration, and development of natural gas, oil, and natural gas liquid (NGL) properties in the Appalachian Basin. The company operates through two segments, Exploration and Production, and Midstream. As of December 31, 2014, it held approximately 86,000 net acres in the southwestern core of the Marcellus Shale, Pennsylvania; and approximately 55,000 net acres in the southeastern core of the Utica Shale located in Belmont County, Ohio. The company also has operations in the Upper Devonian Shale located on Pennsylvania acreage.
Take a look at the 1-year chart of Rice (NYSE: RICE) below with the added notations:
After trending lower since May, RICE formed what appears to be a double bottom (green) price pattern. The pattern is as simple as it sounds: Bottoming, rallying up to a point, selling back off to a similar bottom, and then rallying back up again. As with any price pattern, a confirmation of the pattern is needed. RICE confirmed the pattern by breaking up through the $11 resistance (red) that was created by the double bottom pattern.
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The Tale of the Tape: After trending lower into December, RICE confirmed a double bottom price pattern. A long trade could be entered on a pullback down to the $11 level with a stop placed under that level.
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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