When I consider a stock, I like to look at more than one time frame so I have all the information I need before making a trading decision. So, for HollyFrontier(HFC), I'm going to start with the weekly chart and then go from there.
HollyFrontier (HFC) -- Weekly
Source: Dynamic Trader
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Here, I see a healthy downside correction within a larger uptrend. I also see two standout zones for possible support -- and the first one is already being tested. The first zone comes in at the $38.29-to-$38.92 area. It includes the coincidence of a 0.382 retracement of a major swing, a 1.272 extension of another and a 100% projection of the first swing down from the 3/8 high.
All of this is illustrated on the weekly chart above. Notice how the first swing down totaled $13.95, while the second swing came to a very similar $13.89. I call this similarity "symmetry."
The second zone comes in at $34.72 to $36.22. This area includes a 0.786 retracement, another 100% projection of another swing down and a 0.618 retracement of yet another swing.
To begin with, I am willing to place some buy-isde bets as long as the price continues to hold one of these two key weekly support zones. But let's now take a look at the daily chart and see what that time frame is telling us!
HollyFrontier (HFC) -- Daily
Source: Dynamic Trader
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This chart does have some mixed parameters, and I do see that we would have an uphill battle ahead of us, but these do not negate the trade setup. They just mean the odds may not be as high that the setup will play out.
For instance, the price is still below the 200- and 50-day simple moving averages. It is preferable to have those on your side, as that would support the bullish scenario against the weekly support. I also see a pretty healthy hurdle on the way up at the $45.93 to $47.53. Within this hurdle are the 100% projections of two of the prior rally swings, as illustrated on this chart.
One of the prior swings was $7.50, and the other was $7.62. So far the current rally from the recent low has been $5.07. So how should we trade this?
I have not yet taken a position in this one, but I'd handle it one of two ways. The first would be to take the setup on a pullback to the weekly support, with a stop below the recent low, and then to trail up stops if we get into the resistance decision. The higher-probability strategy is to wait until the hurdle is cleared, and then to buy the next pullback instead. Either way, the risk would be clearly defined.
The upside potential, as shown on the weekly and daily charts, comes in at $64.70. That does not mean the stock will definitely get there, but it's the levels we're shooting for. After all, for these types of setups, the most important aspect is having a reason for the trade, defined risk and a goal. Happy trading!
At the time of publication the author held no position in the stocks mentioned.