Energy stocks continue to underperform the broader U.S. markets in 2017. The going for energy stocks such as Chevron Corporation (NYSE:CVX), as well as for the price of oil, has been choppy over the past two weeks. However, the sun is starting to shine — the recent three-day rally looks promising for CVX stock, which has reached a major technical confluence area of support in recent days.
Let’s explore what that means for this big-yielding oil stock, and what we can expect as far as a buying point is concerned.
When I last discussed shares of Chevron on March 2, I said that the stock looks like it could achieve a next leg higher if and when it could overcome the $114.50 area (on a daily closing basis). CVX stock never moved above this key price level, and thus the trade never triggered. Instead, energy stocks and the price of oil took another leg lower in the second half of March, retesting or in some cases marginally undercutting their respective early March lows.
But as we will see in the first chart below, the bullish setup for a multiweek (or even multimonth) rally in energy stocks and oil … well, it never broke.
To be clear, the energy sector of the S&P 500 — as represented by the Energy Select Sector SPDR (ETF) (NYSEARCA:XLE) and thus also most of its major components like Chevron stock — remain in a well-defined multimonth downtrend within a longer multiyear downtrend. As such, the trade idea I’m about to offer respects these dynamics.
CVX Stock Charts
Looking at Chevron’s multiyear weekly chart, we see that the stock has been in a clear uptrend since late summer 2015, which by November 2016 broke the stock past its 200-week simple moving average (red).
The recent multiweek selling spree has now retraced the stock back to this moving average, which now also lines up with horizontal support as well as the lower end of the uptrending channel (black parallels).
All of this is creating a very well-defined area of confluence support for CVX stock near $105-$106.
On the daily chart, we see that the 200-day moving average (red) also lines up with the aforementioned are area of support.
Furthermore, Chevron stock earlier this week once again reached the lower end of the multimonth downtrend, as well as the 61.8% Fibonacci retracement of the entire rally from September 2016 into the December 2016 highs.
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Talk about a lot of different technical “stuff” coming together all at one spot!
The way I see it is simple: Traders could consider buying CVX stock around the $107 or $108 area using the $105-$106 area as a very well-defined stop-loss. A first upside target around $112 could be used.
Also, traders and active investors alike should note that Chevron’s ex-dividend date for its next payout should come sometime in mid-May, with the payout itself typically doled out in June. CVX, at current prices, yields just more than 4%.
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