Trade of the Day: Profit From a Quick Pop in ALJ Stock

Advertisement

Alon USA Energy, Inc. (NYSE:ALJ) — Shares of this oil refining company perked up in Thursday trade and made a good attempt at breaking past a pesky and obvious horizontal line of resistance. As a result, they look closer to a long-awaited breakout move.

ALJ stock rose 2% on Thursday, likely due in part to news the company is looking at options to expand its refinery in Big Spring, Texas. But the bigger picture driver for the sector is the U.S. dollar. While I think we may see one more bounce in the greenback heading into summer, the near-term trend remains down, which is bullish for commodities like oil and related stocks.

Looking at the chart, note that this is the stock’s sixth attempt at breaking past the horizontal resistance line around $17 since the end of 2013. The more a resistance line gets tested, the more powerful the ultimate breakout move tends to be.

The sell-off in ALJ stock from November to January resulted in a steep snapback move and confirmed the January low as an important one.

After bumping into resistance in early April, ALJ stock began to consolidate right below this line in a fairly tight and well-defined trading range. In the meantime, the 50-day simple moving average (yellow line) had time to catch up to the stock and could provide support.

Buy ALJ stock for a trade to the $18 to $18.50 area over the next two to three weeks. Any major bearish reversal thereafter, particularly if it comes on a rising dollar, would be a warning sign to get out.

ALJ Stock Chart
Click to Enlarge

Like what you see? Sign up for our daily Beat the Bell e-letter and get investment advice delivered to your inbox every morning!

Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2015/05/alon-usa-energy-inc-alj-stock-trade-of-the-day/.

©2024 InvestorPlace Media, LLC