DNR Stock: A Bullish Trend Still in Development
I am focusing on Denbury Resources Inc. (NYSE:DNR) stock because I wanted to follow up on a report that I wrote on March 29, titled “DNR Stock Is Clearly a Bullish Trend in Development.”
In that report, I outlined why I believed that higher Denbury Resources stock prices were likely in development.
When that report was published, the stock was trading at $2.67. It is currently trading at $4.45, which means that, over the course of less than three months, the stock has appreciated by almost 66.7%. This move is very respectful, and I have reason to believe that it is not over yet.
These beliefs are based on the same indicators that first piqued my interest in this stock, which are still supporting the DNR stock price.
The indicators currently supporting a move toward higher prices are highlighted on the following chart.
Chart courtesy of StockCharts.com
This Denbury Resources stock chart illustrates that the bullish move toward higher prices has been supported by bullish momentum and an uptrend line.
The indicator responsible for determining whether bullish or bearish momentum is influencing the price action in a stock is the moving average convergence/divergence (MACD).
MACD accomplishes this task using the crossing of a signal line. A bullish MACD cross implies that bullish momentum is influencing a stock toward higher prices, while a bearish MACD cross implies the opposite.
Momentum is a very powerful force because a stock cannot sustain a move in either direction unless the applicable level of momentum is supporting it.
In the middle of July 2017, the MACD indicator generated a bullish cross. Since then, a move toward higher prices has followed.
The entire time that the stock price has been advancing, the MACD indicator has remained in bullish alignment. As long as it remains that way, I can only assume that higher prices are still in development.
Shortly after the bullish MACD cross was generated, DNR stock began making a series of higher highs and higher lows, which is the quintessential characteristic of a bullish trend.
This bullish trend was captured using an uptrend line, which was produced by connecting the troughs that were created by the series of higher lows.
This uptrend line not only captures the bullish trend, but also identifies where price support resides. This uptrend line is very significant because, as long as the stock continues to trade above the price support outlined by the uptrend line, I can only assume that a bullish trend remains in development.
Aside from these indications, the price action above the uptrend line is currently suggesting that the trend toward higher prices is likely to continue.
The price action is a completed technical price pattern, which is highlighted on the following Denbury Resources stock chart.
Chart courtesy of StockCharts.com
The completed technical price pattern highlighted on the above DNR stock chart is a symmetrical triangle pattern.
Symmetrical triangles are created when the price action is characterized by a sequence containing a series of lower highs and higher lows.
This pattern was captured by connecting the peaks and troughs that were created by the price action. This process creates two converging trend lines. These trend lines define significant levels of price support and price resistance. Only when one of these levels is breached is the pattern finally resolved.
The converging nature of these trend lines is why triangle patterns are particularly powerful patterns. The power from these patterns is created by the convergence of space between price support and price resistance.
This phenomenon causes energy to build within the pattern as it develops. This stored energy will only be released when the stock either breaks above resistance or falls below support.
On June 20, DNR stock broke above resistance, completing the symmetrical triangle. This feat suggests that higher stock prices are now likely to follow, reinforcing the other indications suggesting that the bullish trend is still in development.
I am still bullish on Denbury Resources stock because a number of indicators continue to suggest that a sustained move toward higher DNR stock prices is in development.
I will maintain this view as long as the indicators remain in bullish alignment.