The broader stock market rally on Tuesday was led by the energy sector, which closed the day higher by about 3.3% in one of the best one-day performances in years. Within this group, a major component is Chevron Corporation (NYSE:CVX), which as a result of Tuesday’s lift broke out of a well-defined two-month trading range.
Active investors and traders could now dip a toe in CVX stock with the bet that Tuesday’s momentum will continue in coming days/weeks.
Before looking at the charts, it is important to note that many groups of stocks have one or two major drivers that over the course of a year explain the majority of their performance, aside from top- and bottom-line growth. In the case of the energy sector of the S&P 500 it is the price of oil that plays a significant role in pushing stocks up and down, although each constituent stock may have varying degrees of sensitivity to the oil price.
Chevron Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
With this in mind, let’s look at the multiyear weekly chart of CVX stock. Note that the selling pressure in late January and early February quickly mean-reverted it back to the multiyear support line. Since then, the stock largely bumped sideways in a choppy fashion, working off the oversold conditions.
At the bottom of the chart I added the chart of the price of oil as represented by the United States Oil Fund (NYSEARCA:USO) in blue. Note that Tuesday’s rally in the price of oil now has it back at the upper end of its recent trading range, looking visibly giddy to potentially break higher. Should this take hold then that would, all else being equal, be further supportive of a move higher in CVX stock.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see that Tuesday’s rally marginally broke CVX stock out of a two-month trading range as marked by the blue box. The simple bet here would be to see some continuation of this rally in coming days or weeks. The good thing about the current juncture is that any major bearish reversal and give-up of Wednesday’s rally would quickly prove the breakout wrong.
A next upside target is the $124 area.
Access Serge’s Free SSO Strategy eBook HERE — find high-probability trades like a Wall Street professional.
Check out Anthony Mirhaydari’s Daily Market Outlook for April 11.
Tell us what you think about this article! Drop us an email at editor@investorplace.com, chat with us on Twitter at @InvestorPlace or comment on the post on Facebook. Read more about our comments policy here.
