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Bullish Pennant Formation for Nexen Inc.

05/27/03 10:25:29 AM
by Kevin Hopson

Nexen Inc. recently broke out of a seven-month trading range and is now forming a bullish pennant, indicating a potential move higher in the near-term.

Security:   NXY
Position:   Accumulate

I touched on Nexen Inc. (NXY) just last week. More specifically, I stated that Nexen's recent channel breakout would likely lead to higher prices in the long-term. Additionally, I recommended accumulating shares on a potential pull back to the $22.00 to $22.50 range, site of the stock's 200-day moving average and the top of Nexen's former trading channel. As expected, the stock found support here.

However, Nexen is now showing signs of moving higher again. For example, if you look at the one-year chart, you will notice that the stock has formed a bullish pennant. This is basically a symmetrical triangle or a pattern of lower highs and higher lows, as indicated by the green trendlines. Since this formation tends to act as a continuation pattern and the short-term trend is positive, I believe Nexen will break to the upside in the near-term.

Graphic provided by:
If so, I think the $23.50 to $24.00 range is an ideal target, as this is site of the 61.8 percent retracement level from the Aug. '02 to April '03 decline and last September's corrective high. As a result, I would continue to accumulate shares of Nexen on any price weakness.

Kevin Hopson

Kevin has been a technical analyst for roughly 10 years now. Previously, Kevin owned his own business and acted as a registered investment advisor, specializing in energy. He was also a freelance oil analyst for Orient Trading Co., a commodity futures trading firm in Japan. Kevin is currently a freelance writer.

Glen Allen, VA
E-mail address:

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Date: 06/03/03Rank: 5Comment: 

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