GMX Resources Inc. - GMXR - close 7.79 change -0.23 stop 6.80

Company Description:
GMX Resources Inc. (GMX) is a pure play independent oil and natural gas exploration and production company. The Company is focused on the development of Haynesville/Bossier Shale and Cotton Valley Sands in the Sabine Uplift of the Carthage, North Field of Harrison and Panola counties of East Texas (its core area). The Company has three subsidiaries, Diamond Blue Drilling Co. (Diamond Blue), which owns three conventional drilling rigs in GMX’s core area; Endeavor Pipeline Inc. (Endeavor Pipeline), which operates the Company’s natural gas gathering system in its core area, and Endeavor Gathering, LLC (Endeavor Gathering), which owns the natural gas gathering system and related equipment operated by Endeavor Pipeline. A 40% interest in Endeavor Gathering is owned by Kinder Morgan Endeavor LLC (KME).

Target(s): 8.85, 9.40
Key Support/Resistance Areas: 7.00, 7.50, 8.20, 9.00, 9.50
Time Frame: Several weeks

Why We Like It:
GMXR has broken a two longer term downward trend lines and appears to be ready to break out of a resistance area at $8.20. The stock has made a series of higher lows on the daily chart and is forming an ascending triangle. GMXR has closed above its 50-day SMA the past three days and may also be forming a bull flag. Volume has been noticeably higher in recent weeks, especially on days when the stock is advancing. Today's pullback was on light volume. This signals that institutional money may be acquiring the stock which is a bullish indicator. The conundrum is whether to buy the stock on a breakout or a dip. So I suggest we use a trigger for both scenarios and buy GMXR if it trades up to $8.25 or on a dip down near $7.55, which is a prior resistance area and should act as support. Aggressive traders can enter now. Our targets are $8.85 and $9.40 and our initial stop will be $6.80 which is below the 20-day SMA. I will adjust the stop once we are in the position. NOTE: The options have a wide spread so I am going to refrain from officially suggesting an option position. The August $5 calls which are DITM look fine but trading the stock is suggested.

Suggested Position: Long GMXR stock if it trades up to $8.25 or down near $7.52, whichever occurs first.

Annotated Chart:

Entry on June xx
Earnings Date 8/3/10 (unconfirmed)
Average Daily Volume: 1.6 million
Listed on 6/17/10