The direction of energy prices has become a key input for traders and investors. The price at the pump has become more than just small talk and the direction of energy companies is more than just an abstract decision by investors about sector weightings. Let's look at Devon Energy Corp. (DVN).
In this first chart of DVN, above, we can see that prices have been under pressure during the past 12 months. The 50-day Simple Moving Average went below the 200-day average in July as the downdraft accelerated -- Japanese traders call this a death cross. Since November, the On-Balance-Volume (OBV) line picked up steam on the downside, as volume became heavier on days when DVN closed lower. That's a sign that the bears were more aggressive. In recent sessions, the volume of trading in DVN has been heavy. This can be interpreted in two ways. It could confirm the bearish outlook for the stock -- as traders vote by selling. Or, it could mean that we are seeing some classic "throw in the towel" selling. With prices of DVN weak this morning, we don't think the decline is over just yet.
This longer-term chart of DVN, above, is more bearish, as it shows the continued decline from the 2008 peak. Prices are back to lows not seen for many years. The OBV line on this time frame is pointed down, and a slight bullish divergence from the momentum study in the lower panel has not translated into any price support. A point and figure chart, below, can be useful in gleaning long-term price targets -- and $9 is a possible objective. That's still a long way down from here.