Chevron's Downtrend Remains, but Don't Short It

 | Apr 18, 2017 | 9:26 AM EDT
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Chevron (CVX) topped out in December and January and rolled over. Prices have continued to weaken over the subsequent months taking this energy giant back to key support. Let's drill down into the latest charts and indicators to see what may lie ahead.

In this updated daily bar chart of CVX, below, we can see a downtrend in its fourth month. Prices have been below the declining 50-day moving average line since late January and recently CVX has broken below the still rising 200-day moving average line. 

The On-Balance-Volume (OBV) line peaked in mid-December and has been declining since, signaling more aggressive selling with heavier volume on days when prices have closed lower. In the lower panel is the 12-day momentum study which does not show any bullish divergences during the decline. A bullish divergence would have suggested that CVX could bounce or rally in the weeks ahead, but unfortunately that is absent.

In the weekly chart of CVX, below, we have more sell signals. CVX is trading below the 40-week moving average line. It would only take a small rally by Friday to put CVX back above the 40-week average but right now the signal is bearish. There is a six-month band of support in the $105-$96 area and this could halt or reverse the decline. The weekly OBV line shows a peak in December and a subsequent decline, suggesting a few months of liquidation.

The weekly Moving Average Convergence Divergence (MACD) oscillator gave a take profits sell signal in January and is not all that far above the zero line. A decline below the zero line for the MACD oscillator would be an outright sell signal.

In this Point and Figure chart of CVX, below, we see that support on this chart is in the $102-$96 area. A decline to $100 could be tolerated but weakness to $99 should make even longer-term bulls nervous.

Bottom line: CVX is in an intermediate-term downtrend. Prices have yet to bottom or rebase so longs should be shelved, but shorts are not recommended with considerable support just below the market.



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