The share price of Marathon Oil (MRO) lost its footing and tumbled lower last year as oil prices sank deeper and deeper.
This daily chart of MRO, above, shows a year-long bearish configuration with the price of MRO below the declining 50-day and 200-day moving averages. You want to trade in the direction of these two key moving averages. Notice the weak On-Balance-Volume (OBV) line, telling chartists that volume has been heavier on days when MRO closes lower. Investors still seem to be anxious to liquidate long positions.
In the bottom panel we show the momentum study, which looks at the rate of the change of prices. The chart shows what is called a bullish divergence -- prices have made lower lows in December and January, while the momentum indicator has made an equal low. It would be more positive if the momentum study made a higher low in January, but we have to work with what the market gives us. Momentum is a leading indicator, but so far this bullish divergence has yet to generate much on the upside for MRO.
This longer-term chart of MRO, above, shows the tumble from its 2014 zenith. MRO fell hard and remains below its declining 40-week moving average. The OBV line is negative and despite a bullish divergence on this time frame of prices versus momentum, prices haven't gotten the message. MRO could bounce up to test the 50-day moving average in the $12 to $13 area, but without the building of a new base for Marathon, rallies are not likely to be long sustained.
