Chevron Corporation (CVX) — This global integrated oil company is one of the best managed in the industry, but it is suffering the impact of low oil prices, and geopolitical and currency risks loom. Despite announcing it would slash its capital spending by 24% next year, CVX stock rallied 1.9% on Thursday.
The company has raised its dividend in each of the past 28 years, which now stands at $4.28 for a 4.8% yield. But S&P Capital IQ Equity Research warns depressed oil prices will weigh on cash flows and may result in slowing dividend growth.
Its analysts estimate earnings will fall from $10.14 per share in 2014 to $3.83 in 2015, and then decline to $3.76 in 2016.
CVX stock fell from a high of over $135 in July 2014 to a low under $70 on the Aug. 24 market sell-off. It then built a base at about $75 and rallied to a closing high of $98.14 in November.
But a head-and-shoulders formation developed from October to late-November, and on Dec. 4, it broke down through the neckline at $87.
After falling below $85, CVX stock rallied to close above the neckline — a dead cat bounce after a breakdown from this classically bearish top. The rally could continue to about $90, which is where traders should enter a short sale. The target for a breakdown is $75, which would result in a profit of 17%.
Enter a stop-loss order to protect against a rally and the potential for theoretically unlimited losses. And be aware that if you hold CVX stock short through the company’s ex-dividend date, expected in late January or early February, you will be required to pay it to the owner of the stock.
