Suncor Energy Forms This Bullish Pattern: What's Next?

Sept. 30 is Orange Shirt Day in Canada, also known as the National Day for Truth and Reconciliation, and Suncor Energy, Inc SU has been working since 2015 to build authentic relationships with indigenous peoples.

On Sept. 16 the Canadian-based integrated energy company announced it had formed a partnership with eight Indigenous communities in the Regional Municipality of Wood Buffalo. Suncor, along with three First Nations and five Métis communities, will acquire TC Energy’s 15% equity interest in the Northern Courier Pipeline Limited Partnership. The deal is valued at $1.5 billion and will provide long-term revenue for the indigenous communities.

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The Suncor Chart: On Tuesday and Wednesday, Suncor was consolidating a 25% move higher that began on Aug. 19 when the stock put in a bottom at the $17.10 level. Since then, Suncor has traded in a strong uptrend making a series of consistent higher highs and higher lows.

The move higher paired with the consolidation has formed Suncor into a bull flag pattern. If Suncor breaks up bullishly from the parallel flag formation, traders will want to watch for big bullish volume to come in for confirmation the pattern was recognized. The measured move of a bullish break from the flag is about 16%, which could boost Suncor up to around the $24 level eventually.

The consolidation into the flag has helped Suncor cool down its relative strength index (RSI), which was measuring in at about the 65% level. When an RSI nears or exceeds 70%, it puts the stock into overbought territory, which can be a sell signal for technical traders.

Suncor is trading above the eight-day and 21-day exponential moving averages (EMAs) with the eight-day EMA trending above the 21-day, both of which are bullish indicators. The stock is also trading above the 200-day simple moving average (SMA), which indicates overall sentiment is bullish. On Wednesday Suncor tested the SMA as support and held above it.

• Bulls want to see big bullish volume come in to break Suncor up from the bull flag pattern and for the stock to regain the $21.63 level as support. If the stock can trade up above the level, it has room to move up toward a higher resistance at $22.59.
• Bears want to see big bearish volume continue to drive Suncor down until it loses support at the $20.59 level and the 200-day SMA. Below the levels there is a support at $19.56.

Photo: Jeffrey Beall, via Wikimedia Commons