Diamondback Energy (FANG), operating in the Permian Basin, approaches a pivotal moment as its stock nears $170.15. This price point previously led to a swift decline of nearly 35% to $112 after repeated failure to hold, causing a significant market impact.
Following the plunge to $112, buyers cautiously re-entered, resulting in a gradual recovery. This recovery, marked by consistent higher lows, has brought FANG back to $148, reflecting genuine market interest rather than a temporary rebound.
Resistance Into Support
Now, the challenge lies at $170.15, where previous support has become resistance. Traders previously purchasing near $170 may aim to exit as it returns to break even, making this level a notable psychological barrier.
A successful break above $170.15 could turn resistance into support, potentially leading to $185-$195. Conversely, rejection at this level might signal further decline, possibly testing the $130-$125 support range and potentially revisiting $112.
Traders are advised to exercise patience, with bulls seeking confirmed breakout and bears watching for resistance signals. Diamondback Energy’s future trajectory hinges on whether $170.15 becomes a platform for growth or a persistent obstacle.
Critical Resistance Level
We see Diamondback Energy approaching the critical $170.15 resistance, a level that still haunts traders from the breakdown we witnessed back in 2024. That support failure triggered a punishing 35% slide, so the current approach is filled with tension. This time, however, WTI crude has surged over 15% in the last quarter to $88 a barrel, providing a strong tailwind that was absent during last year’s collapse.
For those who believe the breakout is coming, patience is key until we see a confirmed close above $172. Given that implied volatility for January 2026 options has climbed to a six-month high ahead of this test, a bull call spread, like buying the Jan $175 call and selling the Jan $185 call, could be a smart play. This strategy defines our risk while targeting that next leg up.
Conversely, the memory of that prior failure at $170 makes a rejection a very real possibility. If the stock shows weakness at this level, traders could initiate bearish positions with a clear stop-loss just above $175. With that higher implied volatility, selling a call credit spread with a strike above $180 offers a way to profit if this ceiling holds firm as it did before.
A more cautious approach is to wait for a potential pullback to the ascending trendline, which now sits closer to the $145 mark. Buying call options or shares with a tight stop below that trendline offers a better risk-reward entry for those of us who miss the initial breakout. This allows the market to prove that buyers are still willing to defend the established uptrend that has been in place since the $112 low.
