Laredo Petroleum, Inc. operates as an independent energy company in the United States. It focuses on the acquisition, exploration, and development of oil and natural gas properties, as well as the transportation of oil and natural gas primarily in the Permian Basin in West Texas. As of December 31, 2015, it had interests in the 135,408 net acres in the Permian Basin; and had total proved reserves of 125,698 thousand barrels of oil equivalent.
Take a look at the 1-year chart of Laredo (NYSE: LPI) below with my added notations:
LPI has been trending consistently higher for most of 2016, while also forming a trendline of support (blue) over the most recent 4 months. In addition, the stock had created at 52-week high resistance level at $14 (green). At some point, LPI was going to have to break one of those two levels, and yesterday the stock broke resistance.
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The Tale of the Tape: LPI broke above resistance. A long trade could be made on a pullback down to the $14 level, or on a fall to the trendline, with a stop placed below the level of entry. A break below the trendline could be an opportunity to get short the stock.
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
Follow me on Twitter: @cmtstockcoach