Oil stocks bounced on Monday and Tuesday of this week thanks to a much-needed oversold bounce in oil prices. Among the bouncers was Chevron Corporation (NYSE:CVX), a large integrated oil company that now sports a 4.6% dividend yield thanks to share pain.
That pain might be over, though. The technical picture increasingly argues for a good move higher in Chevron stock into the first quarter of 2016, particularly should oil prices see some mean-reversion upward movement at the same time.
When CVX reported its latest earnings results on Oct. 30, the numbers came in above analyst expectations, and Chevron shares extended their already sizable rally off the late August lows. But as oil prices couldn’t keep a sustainable bid and began to slide again in November, so too did CVX stock.
Earlier this week, NYMEX crude oil futures had tumbled to a $34 handle, taking out their late August lows, but CVX shares found support at a much higher low versus their August lows. This positive divergence between large integrated oil stocks and the price of oil has been ongoing for the past few months, and now a move in the U.S. dollar following today’s December FOMC statement could see oil and oil stocks’ prices bounce in kind.
Chevron Stock Charts
Looking at CVX stock through a long-term lens, we see that by summer 2014, shares simply got too far removed from their longer-term underlying support line. The mean-reversion move since has been nasty and ferocious and resulted in Chevron stock marginally breaking below this long-term support.
Bulls point to the strong bullish reversal that CVX stock has written on the monthly bars (per the below chart) while bears are still cautious for a break below long-term support, even if the stock is back above it for now, tends to need more time to repair a chart.
For me, I respect both arguments, and from this angle see more bounce potential for now (namely, an extension of the rally that resulted from the August washout).
On the daily chart, note that Chevron stock last week found support at its blue 100-day moving average. In November, CVX found resistance at its red 200-day MA and is thus now consolidating between those two lines. The 200-day currently also coincides with the black diagonal resistance line from the summer 2014 top, thus creating a confluence area of resistance around the $94-$95 area.
The consolidation phase since looks constructive, but to trigger a next wave higher, Chevron stock needs to first clear this area of resistance.
Active investors and traders could look to buy CVX on a push and hold above the $94-$95 area for an initial move toward the $105 mark.
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