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Quicksilver Resources Nearing Support

03/21/08 09:14:27 AM
by Kevin Hopson

Quicksilver recently broke out of a bullish trading range and is now falling back toward key support, making the stock an attractive buy at lower levels.

Security:   KWK
Position:   Accumulate

Quicksilver Resources (KWK) broke out of a bullish trading range in early February, indicating a possible upside target of $42–48 (Figure 1). I calculated this target by taking the number of times the stock tested the top channel line in alternate sequence (3), multiplying this figure by the width of the trading range ($30 - $24 = $6) and then adding this amount ($6 x 3 = $18) to the bottom ($24 + $18 = $42) and top ($30 + $18 = $48) channel lines.

FIGURE 1: QUICKSILVER, DAILY. Because KWK recently topped out around $39 and is now pulling back, $42 continues to be a minimum upside target for the stock.
Graphic provided by:
Because Quicksilver recently topped out around $39 (did not meet the first price target) and is now pulling back, $42 continues to be a minimum upside target for the stock. Though the stock is attractive at current prices (~ $32), I would look for a better buying opportunity near the $30 level. The reason I say this is because there is a huge convergence of support here.

For instance, the top of the prior trading range comes into play around the $30 level. Broken resistance tends to act as support during pullbacks, as those who previously sold here look to buy back in. Also coming into play here is the 61.8% retracement level from the January to March rally, as well as the stock's 100-day exponential moving average. If that is not enough, the blue median line (pitchfork) is converging here. As a result, I would consider accumulating on weakness and buying aggressively at the $30 level if the opportunity presents itself.

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: 03/22/08Rank: 4Comment: 

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