Kinder Morgan (KMI) shares weakened this week after the announcement that they will cut their dividend by 75%. The company reduced the dividend from $0.51 to $0.125, much lower than many expected. The world’s largest energy transportation and storage company saw its stock rally over the past 48 hours as expectations grow that the company might raise more debt.
Price action on the KMI daily chart shows that the recent collapse coincides with the steep decline with oil prices. The company’s value is down over 50% from when the company announced payouts may be cut in October. Price may have also formed a bullish ABCD pattern. Point D is targeted just ahead of the 261.8% Fibonacci expansion level of the B to C leg. Point C was confirmed with 50.0% Fibonacci retracement level of the A to B slide. If valid, we could see a bullish reversal target the $21.45 zone. Major resistance will come from psychological $24 handle.
If we see a return of the bearish trend and the bullish reversal is invalidated, deeper support may come from the $10.00-10.24 area.
The Trade: Buy KMI at $16, with a stop loss at $14 and a take profit at $20. The Risk/Reward Ratio is 1:2