Cimarex Energy Co. operates as an independent oil and gas exploration and production company primarily in Oklahoma, Texas, and New Mexico. As of December 31, 2016, it had a total proved oil and gas reserves of 2.89 trillion cubic feet equivalent (Tcfe) consisting of 1.47 trillion cubic feet of natural gas, 0.64 Tcfe of oil, and 0.78 Tcfe of natural gas liquids primarily located in the Mid-Continent and Permian Basin regions. The company also owned interests in 3,094 net productive oil and gas wells.
Take a look at the 1-year chart of Cimarex (NYSE: XEC) below with added notations:
Over the past three months, XEC has fallen into a sideways trading range. While in the range, the stock has formed a common pattern known as a rectangle. The pattern has formed a resistance at $123 (red), and a $115 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: XEC is trading within a rectangle pattern. The possible long positions on the stock would be either on a pullback to $115 or on a breakout above $123. The ideal short opportunity would be on a break below $115.
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