Today I'll get a bit more specific on a Chevron (CVX) setup I'm watching, and it starts with the weekly chart.
Chevron is currently rallying from a support decision of between $98.85 and $100.81. This zone includes the coincidence of a 0.618 retracement of one swing, a 0.786 retracement of another and the 100% projection of a prior $17.72 decline. The actual low was made at $100.66 on Nov. 15.
Since reaching that low, the stock has seen a rally of $6.03. Note that, if the price remains above this key price area, the upside potential for a bigger-picture rally comes in way above the current level -- at the $123.39 area. But the mere fact that there is a target does not mean the stock will get there. It is something to shoot for if the rally does indeed continue from the recent low.
So how should you enter a trade now with these parameters in mind? Let's take it down to a lower time frame to refine the risk, and look at the 30-minute chart.
Now, if the last low in this stock is any good, I would like to see the bullish pattern remain intact -- which, in my view, would mean holding above the $102.76 swing low identified on this intraday chart.
Two areas of support come in above this prior low. The first zone is between $104.77 and $105.27. This would provide for a more aggressive entry, since you would have to risk more. The second zone, and the one I would prefer to wait for, comes in between $103.53 and $104.39. This zone has better "symmetry" support, but that does not mean it will get there.
The bottom line is that, as long as the price holds above one of these areas in Monday's session and I see some favorable activity to follow, I'll be looking at a bullish options strategy in Chevron, with my risk defined below the $102.76 low. If that level is taken out, I will back off the buy side until further notice.
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