Chevron Corp (CVX) has taken a sharp and painful decline in a short period of time -- and you thought it took a long time to drill down to strike oil -- ha! I am not trying to be flip about the decline as I am sure someone who reads this column lived through the selloff. Let's step back and look at the charts and indicators this morning to see if we can find a reasonable strategy going forward. (Also, see Jim Cramer's These 4 Stocks Seem Attractive Right Here.)
In this updated daily bar chart of CVX, below, we can see how the selloff unfolded. Prices made a possible "bull flag" formation in the middle of January but in my book the pattern lasted too long. Look at the pattern in late December and the next flag-like pattern in early January. These two patterns only lasted a few days which is what you want to see -- just a short pause before the buying comes in again.
As prices stalled in mid-January the On-Balance-Volume (OBV) line stalled telling us that buyers and sellers of CVX where in balance. Looking at the slow stochastic indicator in the bottom panel of the chart one can see that prices were "overbought" and that the stochastic indicator was weakening before prices hit the skids. On the decline, CVX closed below he 50-day moving average line and the slope of the line has now turned negative. The rising 200-day moving average line has been broken also.
In this weekly bar chart of CVX we can see that prices have been in an uptrend since 2015. Prices have declined to break chart support in the $120-$115 area and the flattening 40-week moving average line. The weekly OBV line shows weakness the past few weeks as sellers have been more aggressive. The weekly Moving Average Convergence Divergence (MACD) oscillator has crossed to the downside for a take profits sell signal on this time frame.
In this Point and Figure chart of CVX, below, we have included the volume at price data (left scale). The chart indicates a possible downside price target around $84 -- too bearish in my opinion because the layers of potential support. Lots of volume (read potential support) in the $108-$101 area.
Bottom line: There has been a lot of price damage done to the charts of CVX -- cannot deny it. Do we wait for signs of repair and new accumulation/buying or do we look to be a buyer to scoop up a bargain? The Japanese candlestick charts (not shown) indicate that traders have rejected the $112-$108 area. Aggressive and experienced traders could probe the long side of CVX in this area.