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TECHNICAL ANALYSIS


Higher Prices Could Prevail For Talisman Energy

03/23/05 07:39:01 AM
by Kevin Hopson

The stock has met its initial price target based on January's trading range breakout. Does this mean a second price target will come into play?

Security:   TLM
Position:   N/A

Talisman Energy (TLM) broke out of a bullish trading range in mid-January 2005, indicating an upside target of $35.50 to $39.00. I calculated this target by taking the number of times that prices tested the top channel line in alternate sequence before breaking out (3), multiplying this number by the width of the trading range ($28.50-$25.00=$3.50) and then adding this figure ($3.50*3=$10.50) to the bottom ($25.00+$10.50=$35.50) and top ($28.50+$10.50=$39.00) channel lines.

As you can see in Figure 1, Talisman reached the first price target ($35.50) in late February and proceeded to pull back. However, the stock found ultimate support just below the $32.50 level, which is the site of the bottom green parallel line and the 50% retracement level from the late January to February rally. Because prices have stayed within the green pitchfork since the beginning of this year, the current uptrend remains intact.

Figure 1: Talisman. As you can see here, TLM reached the first price target ($35.50) in late February and proceeded to pull back.
Graphic provided by: StockCharts.com.
 
There are only two things standing in the way. One is February's downtrend line, which is illustrated by the red line. The other is the green median line. Since these two trendlines have converged around the $35.50 level, Talisman will need to break resistance here for the second price target to come into play. If successful, look for a further move up to the $39.00 level in the near term.



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: hopson_1@yahoo.com

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