Todays Big Stock: Newfield Exploration Company (NYSE: NFX)

Newfield Exploration Company is an independent oil and gas company engaged in the exploration, development and acquisition of oil and gas properties. Newfield’s domestic areas of operation include the Mid-Continent, the Rocky Mountains, onshore Texas, Appalachia and the Gulf of Mexico. Internationally, the company operates in Malaysia and China. Mid-Continent division is focused primarily in the Anadarko and Arkoma basins. Its Greater Monument Butte is the Greater Monument Butte field area, located in the Uinta Basin of Utah. During the year ended December 31, 2010, approximately 82% of its proved reserves and 90% of its probable reserves were located in resource plays, primarily in the Mid-Continent and the Rocky Mountains.

Please take a look at the 1-year chart of NFX (Newfield Exploration Company) below with my added notations:

Over the last 4 months, the stock has seemed to find support or resistance on or at the increments of $5. First, notice the $45 topside resistance (red), which was also previous support (green). Next, you can see the common $40 level (blue) and the bottom level of $35 (purple). The great thing about NFX is that it shows you how to trade it no matter what direction the market moves. If you like the short side of the market, you could either short NFX on rallies up to a $5 level or on any breakdowns of them. If you want a long play instead, you could buy NFX on a pullback to a $5 level or on any breakout through one of those levels.

The Tale of the Tape: NFX finds the levels of $5 important. These price points always appear to act as either support or resistance and sometimes both. If NFX rallies back up to $45, you could enter a short play. If it breaks back above $45, you could enter a long play. You could also buy NFX if it comes down to $40, or short the stock if it breaks that $40 support. Etc., etc., etc!

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!
Christian Tharp, CMT