Wealth Blueprint Letter| Posted: April 07, 2015
Basic Energy Services, Inc. provides well site services to oil and natural gas drilling and producing companies in the United States. Its Completion and Remedial Services segment offers pumping services, and fishing tools; coiled tubing; snubbing services; thru-tubing; cased-hole wireline services; and underbalanced drilling in low pressure and fluid sensitive reservoirs. The company’s Fluid Services segment is involved in the transportation of fluids; the production of salt water; the sale and transportation of fresh and brine water; the rental of portable frac and test tanks; the recycling and treatment of wastewater; the operation of fresh water and brine source wells, and of non-hazardous wastewater disposal wells; and the preparation, construction, and maintenance of access roads. Its Well Servicing segment provides services performed with a mobile well servicing rig and ancillary equipment, such as maintenance work, hoisting tools and equipment required by the operation, and plugging and abandonment services, as well as manufactures and sells work over rigs. Its Contract Drilling segment employs drilling rigs and related equipment to penetrate the earth to a desired depth and initiate production.
Take a look at the 1-year chart of Basic (NYSE: BAS) below with my added notations:
Starting in July, BAS declined steadily into December, and from there the stock started a 4-month, sideways move. During that sideways move, BAS has created an obvious resistance at $8 (blue). A break above that $14 level should mean higher prices for the stock, and yesterday BAS broke that level.
The Tale of the Tape: BAS broke through its key level of resistance at $8. A long trade could be entered on a pull back down to that level. However, a break below $8 could negate the forecast for a higher move and would be an opportunity to get short the stock.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT