Oil and natural gas exploration and production giant ConocoPhillips (COP), along with the broader market, has rallied strongly off the June lows. On a daily closing basis, COP has jumped about 10% in a straight line for 14 consecutive up-days.
As an aside, the S&P 500 has now rallied nine straight days, and if the index rallies one more day, it would match the streak of September 1995. In other words, rallies of nine consecutive up days or more are rare and suspect to quick mean-reversion moves lower.
Through a 12-month lens, ConocoPhillips has traded in an orderly uptrending channel, the top of which has once again been reached with this latest 14-day stretch.
In comparison to the other rallies from the bottom of the channel to the top, the June-July rally has been the steepest and sharpest, and thus reached the upper end of the channel the quickest. While ConocoPhillips could easily extend a little further and nudge its way outside of the channel, chances are gravity will soon kick in and push the stock toward a little mean reversion lower.
But also note that the stock, through a multiyear perspective, still has a good shot for higher prices, much like some of its peers.
To wit, Exxon Mobil (XOM) solidly held its 2011 uptrend during the latest pullback and now is retesting a major resistance point, the October 2012 highs. Chances favor XOM eventually blowing past resistance, although in the near-term, the stock’s June-July rally also looks too steep to sustain at this rate.
Once COP finally does cool off some, how far could if potentially fall? For now, a 50% retracement of the June-July rally would take it toward the $62 area; a 61.8% retracement would take it toward the $61.20 level.
As the longer-term picture for ConocoPhillips looks OK, I personally will be more interested in the long side after a little cooling-off period.