This Small-Cap Energy Stock May Finally Be Ready to Reverse

Drilling down on a chart of Extraction Oil & Gas LLC (XOG) reveals something that could be positive.

Let's take a deep dive and see what we come up with.

The XOG chart below shows that in early August of last year, price broke below the $13.75 level that had been functioning as support since the middle of April.

From that point, XOG went into a steady series of lower highs and lower lows with a gap down in price in the middle of October, establishing a well-defined downtrend line.

XOG eventually bottomed out in the middle of February and subsequently closed above the downtrend line in early March.

Short-term price resistance, in our opinion, presented itself around the $4.80 level.

Following the violation of the downtrend, buying volume started to increase notably as designated on the chart.

Source: Worden

Last Friday, on sizable trading volume, XOG broke and closed above said resistance that we believe may now function as support.

From the February low, the stock has managed to form a higher low and higher high. In our view, initial resistance may occur around the $7.15 level with secondary resistance coincident with the gap break at $10.35.

Bottom Line

Given that XOG has managed to violate its intermediate downtrend line while making a higher low-higher high and breaking resistance on volume, we believe XOG has formed a "bullish reversal pattern."

At the time of publication, Ortmann had no positions in XOG.