|If you look at the one-year chart for Devon Energy (DVN) (Figure 1), you will see that the stock has been in a strong uptrend since February 2004. However, as you probably know, bull markets tend to see corrections every now and then. As a result, it should be no surprise that Devon has pulled back the last six weeks after hitting a 52-week high in late November. The debate now is when the technicals will start turning up again.|
|If you turn your attention to the six-month chart (Figure 2), it will shed some light on the matter. For example, note how the top black parallel line, blue median line, 20-day moving average ($38.23), and 50-day moving average ($38.24) have all converged around the $38.25 level. Given the confluence of resistance here, this price level will be a significant barrier for Devon in the near term.|
|Figure 1: One-year chart of Devon Energy. A quick glance at this stock suggests that it has been in a strong uptrend since February 2004.|
|Graphic provided by: StockCharts.com.|
Figure 2: Six-month chart, Devon Energy
In addition, if you look back at the one-year chart, you will see that prices are coming up on the bottom blue parallel line (~$38.50). Since Devon broke support here in early January, this trendline could turn into resistance now. Further, the 50% retracement level from the December 2004 to January 2005 decline resides here. As a result, if Devon can overcome key resistance in the $38.25 to $38.50 range, the short-term picture will turn bullish. November's downtrend line (red line) around the $40.00 level would be a possible upside target in the near term.
|Glen Allen, VA|
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