KAR Stock Peaked

The stock of this oil and gas exploration company (ASX: KAR) has recently peaked at $12.10 on last July 24. It’s an historical high price, far above the previous highs posted during the previous years. Oppositely to many other energy-related stocks, KAR soared to unprecedented high levels after it hit a low in last October at $1.645. It rose therefore by 635% in 8 months and a half (between points A and B on the chart).

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The stock really took off when the market bounced at mid-March this year. The bullish trend has been split in a succession of three sharp upward waves followed by corrections. These bullish waves are plotted in blue rectangles on the chart. That’s why the uptrend has been so solid and durable: the price action regularly posted higher highs and higher lows which built a clear stepped incline.

Since the price action posted this high at $12.10, it has already corrected by 12.4%. The current price is $10.6. Is it a typical short-term correction that precedes another bullish wave or is it more than that?

First we have plot a trading system based on the Chande Momentum Oscillator, which is particularly accurate here. You can see that the “SELL” trading signals were triggered with efficient market timing, on top of each of the three bullish waves. The Relative Momentum Index (RMI), which was moving within its overbought area since last June, has just reached its 70-line. A cross below this line would confirm that the correction is not over yet.

The immediate target is the level of $9.3, which is 12.3% lower than the current level. The medium-term bullish trend generated in March would be cancelled if price action falls below. It would mean than the intermediary support level created by the previous high is cleared. In this case, the new objective would the level of $8, another high that may become a new low.