Comstock Resources (CRK) is coming out of a classic-looking saucer, or rounded-bottom, pattern. I think it is still "early in the game" for this low-priced energy name. There is likely to be plenty of overhead resistance, but for now this stock is doing all the right things to get our attention and support.
In this twelve-month daily chart of CRK, below, we can see both the decline in late 2015 and the basing action this year. CRK traded in a tight range around $4 from March until mid-August. From August CRK has more than doubled.
The volume of shares traded increased dramatically in August and the On-Balance-Volume (OBV) line moved up sharply, signaling aggressive buying and accumulation. The Moving Average Convergence Divergence (MACD) oscillator crossed above the zero line in August for an outright go-long signal. The two lines of the oscillator are touching now, and this could become a liquidate-longs sell signal, or it may not happen as this indicator follows the price action.
In this three-year "log" chart of CRK, below, we can see the long decline in prices and the downward-sloping, 40-week moving average line. CRK has broken above the 40-week line and its slope is now turning positive. The weekly OBV line has moved up sharply, and supports and confirms the rally. The weekly MACD oscillator crossed above the zero line for an outright go-long buy signal.
Bottom line: I would look to go long CRK at current levels -- or on weakness to $9, if available. I would risk to $7.25 -- and on the upside, the $14.50 area is our first price target.
