Kinder Morgan Inc (KMI) — A roughly 4% rally in NYMEX light sweet crude oil futures not only boosted the energy sector Wednesday, but also helped keep a bid under the broader market. Shares of energy pipeline company Kinder Morgan saw a good follow-through rally on the day. While the stock is certainly not out of the woods yet, it looks to be setting up for a good-sized bounce.
The longer-term chart shows KMI stock topping out in March and then embarking on a steady and severe decline. By early November, shares had fallen back to their previous all-time lows from August 2011. Then, after a couple of weeks of consolidation, another leg lower began in early December.
While I am no fan of trying to catch a falling knife, the extreme oversold reading we are seeing per the MACD oscillator is noteworthy. For me, price action must always confirm any other “technical mojo” before I take the signal but, as we will see in a moment, that’s precisely what took over the past couple of days.
From this multi-year perspective and using a technical analysis 101 measurement approach, KMI stock, which is still down more than 60% year to date, could see a rebound to $24 before bigger picture resistance comes back in.
Moving on to the daily chart below, we can see KMI stock pushed below its early December lows on Monday only to rally back hard intraday and close flat. Although shares advanced Tuesday, it acted as a consolidation day with the real follow-through day taking place on Wednesday, aided by the rally in oil prices.
Traders can now use Monday’s intraday lows near $14 as a last-resort stop-loss and the $18 area as a multi-week upside target, which is nearly 10% above the current price.
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As of this writing, Serge did not hold a position in any of the aforementioned securities.