Diamondback Energy Ready to Breakout? – June 1, 2021

Diamondback Energy Inc. (FANG) is an independent oil and gas producer in the United States. The company operates exclusively in the Permian Basin. At the end of 2020, the company reported net proven reserves of 1.3 billion barrels of oil equivalent.

The company has recently been active in building its asset base in the Permian Basin. Plus, FANG just announced it closed a deal to acquire QEP resources and Guidon Operating LLC. This should help the company consolidate its assets in the Midland Basin. Its oil production should increase along with higher prices this year.

While its cash of $121 million as of the end of the first quarter is low, its short-term debt is not much higher at $191 million. In terms of growth, FANG has generated an average of 48.2% sales growth over the past five years. Sales are expected to rise 117.7% year over year this quarter, while earnings are forecasted to soar 1,273.3%.

The company is undervalued with a forward P/E of only 9.57, even though its stock is up 67.2% year to date. This has led to a Momentum Grade of A in our POWR Ratings system and reflected in the chart below.

Take a look at the 1-year chart of FANG below with added notations:

FANG ran up nicely from its November low, but the stock has recently hit a wall at the $88 level (red). That barrier is also preventing the stock from hitting new 52-week highs.

A solid close above that $88 mark should lead to much higher prices for the stock. The possible long position on the stock would be on a breakout above that level with a protective stop placed under it.

I have explored virtually every flavor of technical analysis and chart pattern known to mankind. The sad fact is that the vast majority of them don’t work at all.

That is why I recently put together this special report to help investors focus on the only 5 chart patterns that matter…the ones that lead to the most timely and profitable stock trades. Click below to get your copy now!

Author: Christian Tharp, CMT