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Devon Energy's Trading Range Breakout

04/08/04 11:42:22 AM
by Kevin Hopson

Devon Energy has broken out of a bullish consolidation pattern, indicating higher prices ahead.

Security:   DVN
Position:   Accumulate

Devon Energy (DVN) is one of the largest oil and gas exploration and production (E&P) companies in North America. Unfortunately for shareholders, it has been a very up and down year for the stock, making the short-term fluctuations hard to stomach at times. However, if recent developments are any indication of things to come, investors should be happy holding on for the long haul.

Graphic provided by:
I say this because Devon looks to have broken out of a bullish trading range this week. Looking at the six-month chart, you will notice that Devon recently broke key resistance around the $59.00 level, which happens to be the top of the stock's one-month trading range (or sideways channel formation). From there, Devon proceeded to move above the top parallel line of the black pitchfork, which had previously turned back prices.

Now that Devon has broken out of its bullish consolidation pattern, the stock could eventually make its way up to the $66.00 to $69.00 range. I calculated this price target by taking the width of the trading range ($58.75 - $55.25 = $3.50), multiplying this by the number of times that prices tested the upper channel line (3) and then adding this figure ($3.50*3 = $10.50) to the bottom ($55.25 + $10.50 = $65.75) and top ($58.75 + $10.50 = $69.25) channel lines. As a result, I would look to accumulate shares of Devon Energy in anticipation of higher prices down the road.

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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Date: 04/13/04Rank: 4Comment: 

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