Anadarko Petroleum Must Prove Itself

 | Jun 19, 2017 | 9:38 AM EDT
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Anadarko Petroleum (APC) continues to drill down to lower and lower levels. We examined the charts and indicators about a month ago and our hopes for an island reversal did not materialize.

I do get a little discouraged when a forecast/analysis doesn't go my way, but I don't throw in the towel on the approach. I learned many years ago that there is no approach to security analysis that is 100%.

I tell my students every semester that you will make mistakes as you invest, but the thing is to make small mistakes -- the market is always right and you can't become stubborn about a position. Let's check the updated charts and indicators to see if we can get it right this time.

This daily bar chart of APC, above, doesn't offer us much to get bullish about right now, but let's go through our laundry list. APC has been in a downtrend since early February. We saw prices stabilize in early May and bounce, but that turn faded and we made new lows for the move down by the end of May.

APC is below the declining 50-day moving average line and the 200-day moving average line has also turned lower in the past few weeks. A bearish dead cross at the end of April is also visible.

The daily On-Balance-Volume (OBV) line has worked lower since early January, as sellers of APC have been more aggressive. There is a small divergence this month as prices have made new lows, but the OBV line has made equal lows.

If we also look at the 12-day momentum study in the lower panel, we can see a bullish divergence, as momentum has made higher lows from May to June as prices made lower lows. The pace of the decline has slowed, but this has not translated into a reversal or rally.

In this updated weekly chart of APC, above, we can see how the 40-week moving average line has turned lower. The weekly OBV line is pointed down and the Moving Average Convergence Divergence (MACD) oscillator is below the zero line or in bearish territory.

The one potential positive I want to point out is that prices have nearly corrected or retraced 2/3 of the 2016 rally. The retracements of 1/3, 1/2 and 2/3 come from the writings of Charles H. Dow and were noted in real time by America's first financial analyst (I consider Dow to be more than just a journalist). If the 2/3 retracement area does not work, then the risk is a full retracement and a retest of the $30 level.

In this Point and Figure chart of APC, above, we can see the recent double bottom breakdown at $46.65. A rally to $47.59 is needed to give the chart a new column of Xs. A rally to $49.52 is need to give us a small upside breakout.

Bottom line: following trends can be profitable and fighting trends can be hazardous. APC needs to prove to us that it wants to reverse from down to up.

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