HFC Stock: On the Verge of a Breakout
It is really hard to get a foothold on which direction the market is going to move in on any given day. The trading ranges have been so large that any indications from pre-market activity have been of little or no use.
Market indices that open lower end up trading higher on the day, and market indices that open higher end up trading lower.
These markets are characterized by elevated levels of volatility and, when volatility is elevated, it can mean one of two things: the markets are either forging a top and much lower values will prevail, or a change in leadership is currently underway.
I am taking my cues from the price action and, as long as the market indices hold above a key level of price support, I will be inclined to believe the latter, which is that a change in leadership is currently taking place.
My bullish inclination toward the markets is why I continue to search for investments that are geared toward higher prices. I have noticed a common theme in recent weeks while conducting my research; a number of energy stocks have been making my list.
One of these energy plays is HollyFrontier Corp (NYSE:HFC), and a number of technical indications on the HollyFrontier stock chart are suggesting that this investment is currently geared toward higher stock prices.
These technical indications are highlighted on the following HFC stock chart.
Chart courtesy of StockCharts.com
This HFC stock chart focuses on a bullish trend that began in May 2017. Over the course of eight months, HollyFrontier stock appreciated to the tune of 131.3%.
This move toward higher prices began when a bullish MACD signal was generated. The moving average convergence/divergence (MACD) indicator is an influential momentum indicator that is used to determine whether bullish or bearish momentum is influencing the price action in a stock.
Bullish momentum implies that a stock is geared toward higher prices, while bearish momentum implies that a stock is geared toward lower prices.
Momentum is a powerful force because a stock cannot sustain a move in either direction unless the applicable momentum is supporting it, which is why MACD is such an influential signal.
The bullish MACD signal that was generated in June 2017 correctly implied that HFC stock was geared toward higher prices, and a bullish trend persisted until January 2018, when a bearish signal was generated.
The bearish signal negated the bullish implications from the bullish MACD cross, and it correctly implied that lower stock prices via a correction were in development.
Currently, a bullish MACD signal is in the process of being generated, and it will suggest that HollyFrontier stock is once again geared toward higher prices.
Let’s not dismiss the fact that HFC stock has just created a new high for the year. That this has occurred in the current volatile market environment is a testament to the inherent strength of this investment.
If that wasn’t enough, HollyFrontier stock is on the verge of breaking above a significant level of price resistance, which will open the door to much higher stock prices.
This significant level of price resistance is highlighted on the following HFC stock chart.
Chart courtesy of StockCharts.com
This stock chart illustrates that HFC stock is attempting to break above a significant level of price resistance that currently resides at $52.50.
This significant level of price resistance was first established in March 2013, when HFC peaked at $46.04. Every peak that followed was subsequently a little bit higher.
I used a simple trend line that was created by connecting these peaks and, given the nature of this upward-sloping trend as time progresses, resistance outlined by this trend line continues to appreciate.
The upward-sloping trend line is currently in focus because breaking above it will imply that much higher HFC stock prices are likely to follow—for the simple reason that there won’t be any resistance level to contain the stock price from advancing.
The bullish signal generated by the MACD indicator is suggesting that such a feat is very likely, and I would not be surprised to see HollyFrontier stock accelerate much higher once resistance is finally broken.
A number of technical indications are currently suggesting that HollyFrontier stock is poised for further gains.
As a result of these indications, I am bullish on HFC stock and will maintain this view until there are new indications suggesting that a bullish view is no longer warranted.