Monday, June 09, 2014

Trading Idea: Magnum Hunter Resources (MHR)

Magnum Hunter Resources (MHR) almost doubled in price after breaking out of a bottoming cup and handle base in August of 2013 in above average volume. The stock is currently forming a double bottom base on top of double bottom and handle base. The current base is much tighter and features stronger volume up the right side.

The company is in the hot oil and gas exploration group and drills in two of the hottest areas of the country, Marcellus and Bakken Shale. While the company is yet to turn a profit, sales growth has grown 100% over the last three years and expected to grow 30% over the next three. Rising oil prices and improving margins could lead to earnings surprises over the next few quarter and years.

A breakout above the $9.10 mid point of the double bottom base would be bullish for the stock. Aggressive traders could have entered the stock as it gapped up over the fifty day moving average, in well above average volume, or broke out above the short consolidation after the gap up.

Full Disclosure: Hold Position in MHR

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