The price of oil rallied again on Tuesday and is attempting to push back to its May highs. As a result, shares of oil and related stocks as a group also got a boost, although not all such stocks are created equal. One name that now as a result looks particularly ripe for a breakout rally is Marathon Oil Corporation (NYSE:MRO). MRO stock is showing some very sound technical behavior on the charts and could soon reward traders positioned for another move higher.
This is a good spot to remind ye faithful that gaining perspective through a multi-time-frame approach of analyzing the markets is at the margin where money is made and more importantly “kept” over time. Why? Unless one has perspective on a stock’s price behavior in multiple durations, one risks either over-trading or overstaying one’s welcome in any given “trade” — or investment for that matter.
MRO Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
To wit and looking at the multiyear chart of Marathon Oil we see that MRO stock from early 2016 until early May of this year has traced out a major so-called “base” on its chart. This has allowed its 50- and 100-week simple moving averages to turn the corner from decisively downward sloping to now pointing higher. Said moving averages also held important technical support as of November 2017.
As a result of the sharp rally through the spring this year MRO stock has also managed to hurdle itself back above its red 200-week moving average for the first time in a long time. For the past weeks the stock has now consolidated above this moving average as well as above the blue horizontal on the chart. Barring a significant breakdown in the price of oil from here the path of least resistance looks to be to the upside.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see this recent consolidation phase a little better and any chart-watcher would also likely not find it too difficult to label this phase as a bullish flag pattern.
As I always like to remind my clients the risk in any given trading setup should always be one’s first and foremost consideration, i.e. much before considering what potential upside may be. In the case of MRO stock the risk is currently well defined around the $19.75 area, which is where both horizontal support as well as the 50 day simple moving average come together. Any break below there would be a stop loss signal. A next upside target is closer to $23. More risk-averse traders may first want to wait for the stock to clear back above the $21.50 level before entering a long-side trade.
This trade can also be expressed using a very conservative and highly profitable options strategy. This options income strategy produces between eight and nine winners out of any 10 trades with the few losing trades being very small in size. I am holding a special webinar for Investorplace readers on Thursday June 28th to showcase this strategy in detail. Register here.
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