Valero Energy (VLO) made a strong six-month rally in the back half of 2016 and it looks like a correction is now unfolding. Let's examine the charts and indicators for clues.
In this one-year daily bar chart of VLO, below, we can see that VLO recently closed below the rising 50-day moving average line. Prices are still well above the rising 200-day moving average.
As the price of VLO made higher highs in November and December the On-Balance-Volume (OBV) line made an equal high telling us that volume did not match the price action -- a subtle warning. In the lower panel is the 12-day momentum study, which shows that momentum had equal highs in November and December, diverging from the higher price highs.
In this three-year weekly chart of VLO we can see that prices got close to their 2015 zenith. Prices are above the rising 40-week moving average line and the OBV line looks like it is rolling over in recent months. The trend-following Moving Average Convergence Divergence (MACD) oscillator is still well above the zero line, but the two lines of this indicator have begun to narrow telling us the strength of the advance is weakening.
Bottom line: A pullback/correction to $62 or so on VLO looks likely. If the volume during this anticipated correction is light it will give me encouragement that we could see renewed strength in the second quarter.