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A Break Of Trendline Support For Magnum Hunter Resources?

01/30/04 01:33:59 PM
by Kevin Hopson

Magnum Hunter Resources looks to have breached last July's uptrend line but a further pullback could represent a good buying opportunity.

Security:   MHR
Position:   Hold

Magnum Hunter Resources (MHR) is an upstream oil and gas company with primary operations in the mid-continent, Permian Basin, Gulf Coast and Gulf of Mexico regions. The company also owns gas gathering systems in Oklahoma, Texas and Arkansas, as well as interests in four gas processing plants. Technically speaking, Magnum Hunter has been in a steady uptrend since last summer, as indicated by the stock's ability to stay in the top channel of the black pitchfork during this time.

However, notice that the stock recently breached last July's uptrend line, as illustrated by the dotted green line. Prices may have just overshot the trendline before bouncing back, but only time will tell. In any event, the $9.00 to $9.20 range could act as resistance in the near-term, as July's uptrend line, the top blue parallel line and the stock's 50-day moving average ($9.23) have all been breached.

Graphic provided by:
If prices continue to pull back in the near-term, a good buying opportunity may present itself around the $8.40 level where there is a confluence of support. Specifically, the blue median line and the black median line are both converging at this price level. You also have the 50 percent retracement level from the July-December rally coming into play. Further support comes in around the $8.00 level, the site of the stock's 200-day moving average and the 61.8 percent retracement level from the July-December rally. As a result, I would take a wait-and-see approach and look to buy on a potential pullback to the $8.00 to $8.40 range if the opportunity arises.

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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