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Is Berry Petroleum Preparing To Break Out?

08/28/03 12:06:53 PM
by Kevin Hopson

Berry Petroleum continues to be stuck in a trading range but the technicals point to higher prices down the road.

Security:   BRY
Position:   Accumulate

The last time I touched on Berry Petroleum (BRY), the stock was stuck in a trading range between $17.00 and $18.40. Unfortunately, little has changed since then. However, the stock did test its lower channel line ($17.00) earlier this month, a price level that I said investors should look to buy at. As expected, Berry found support here and proceeded to move higher.

Though the stock continues to move sideways, the technicals point to higher prices ahead. For example, as I mentioned in my prior article, trading ranges tend to act as continuation patterns. In other words, prices will often consolidate before a resumption in the trend occurs. Since Berry is in a long-term uptrend, the stock should see an eventual break to the upside.

Graphic provided by:
If this holds true, Berry should make its way up to the $21.00 to $23.00 range in the longer-term. How do I come to this conclusion? It is very simple. If you look at the chart, you will notice that the stock has tested the top and bottom channel lines two times each (or four times overall). More often than not, prices will break in the direction of the fifth testing point. More specifically, if Berry tests the $18.40 level in the near-term, the stock should finally break resistance here.

If this occurs, Berry will have tested the top channel line three times. If you take this number (3) and multiply it by the width of the trading range ($1.40), you come up with $4.20. Add this number to the bottom channel price ($17.00) and the top channel price ($18.40) and you get a potential target range of $21.20 to $22.60. Given the stock's bullish technicals and long-term upside potential, I would continue to accumulate shares of Berry Petroleum 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
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