A Clear Sell Setup for CVX

 | Mar 14, 2014 | 7:00 AM EDT
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After a nice bounce off key weekly support in this one, we have a very clear sell setup in Chevron (CVX) that has been identified on the daily chart.


Chevron (CVX)
Source: Dynamic Trader


Since the general market is a bit overextended on the upside, it might be worth looking at a few setups on the short side. Here is what I'm looking at in CVX now. The larger pattern in this market is a bearish pattern of lower lows and lower highs, as long as price hangs below the Dec. 27 high. Price is currently below both the 200- and 50-day simple moving averages, which also suggests that the path of least resistance is downward.

I'm seeing a key price resistance decision at the $116.75-117.20 area that includes a couple of symmetry projections along with a minor 1.618 extension.  Besides the price resistance, there were also a couple of timing cycles that came due between Feb. 25-28. The recent high was made on Feb. 28, which was directly within that time window for a possible high. Now, even though we have already seen some short-term sell signals, I don't expect this short to do much of anything unless we can clear the $114.01 area on the downside. This area just represents a symmetrical or 100% projection of a prior minor decline within the rally swing since the Feb. 5 low.

A break of this symmetry would be the first strong signal that CVX can roll over and decline, possibly towards a downside target at the $107.24 area. My risk on this trade is defined above the $116.74 swing high. The potential target is on the downside is at $107.24. 

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