Shares of oil refiner Valero Energy Corporation (NYSE:VLO) have stagnated or “consolidated” in a technically sound manner through the month of October. This may have been the refresher pause the stock needed in order to get a next leg higher underway, possibly into year-end.
Valero reported its latest batch of earnings last week on Oct. 26 before the start of trading for the day. The stock dropped as an initial reaction to the news, but the following day bounced right back in a sign of defiance.
When I last offered my thoughts on VLO stock on Oct. 11, I said that after a good run the stock looked near-term overbought and that it was in need of a pullback or rest. The stock then opted for a sideways consolidation phase, i.e. consolidation in time as opposed to consolidation in price (lower).
VLO Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the longer-term multiyear chart with weekly increments, we see that the breakout rally from September also resulted in a breakout in the longer-term. To wit, through this lens, VLO stock had been in a wider consolidation phase since late 2015 and the September rally finally released the stock higher.
This release rally also pushed the stock higher along its longer-term up-trend, i.e. served as a continuation of the broader up-trend.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
Over on the daily chart, we see that as a result of the powerful September breakout past horizontal resistance (black line) around the $70 area, VLO stock in early October became very removed from its medium-term moving averages. These moving averages at the same time, however, also began to all curl higher in a sign of strength.
As previously mentioned, stocks can either consolidate in price (lower) or in time (sideways). The fact that VLO stock remained defiant in recent weeks and did not consolidate in price shows the support the stock has from the bull crowd.
From here, if and VLO stock can clear and hold above the $78.50 area on at least a daily closing basis, then the next upside target in the $82.50-$85 area should come into focus.
Check out Serge’s Daily Market Outlook for Oct. 30.
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