Shares of Diamondback Energy Inc. (FANG) have made a number of sharp declines the past eight months but each setback was quickly bought and prices recouped those losses. Earlier this month FANG gapped to the downside on heavy volume and prices have yet to rebound. Is something different this time or should we give FANG the benefit of the doubt for now? Let's go through the charts and indicators to see what is best strategy at this juncture.
In the updated daily bar chart of FANG, below, we can see that prices have crossed above and below the rising 50-day moving average line. The 200-day moving average line has been bullish the past 12 months but was tested and broken in June and again this month. Prices are retesting the 200-day average line from the underside today and we will need to see if prices can close back above this longer-term indicator.
The daily On-Balance-Volume (OBV) line has been weakening all year but this month the OBV lien did not make a lower low and this could mark a turn to the upside. The Moving Average Convergence Divergence (MACD) is below the zero line but could turn up again with the recent price action.
In this weekly bar chart of FANG, below, shows prices below the rising 40-week moving average line. A weekly close above $125 would put prices back above the 40-week average.
The weekly OBV line has been stuck in a sideways range like prices have. The weekly MACD oscillator is in a bearish mode above the zero line.
In this Point and Figure chart of FANG, below, we can see a possible downside price target of $95. A decline to $114 is needed to weaken the picture.
Bottom-line strategy: Over the past several months FANG has recouped and rallied from a number of declines. The decline this month is different as selling and volume was more intense but a downtrend has not been initiated. The $130-$135 area is likely to act as resistance. Traders who will be disciplined and risk only to $114.50 could probe the long side of FANG.