Western Refining: When to Buy?

 | Nov 01, 2016 | 4:03 PM EDT
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Looking at the price action of Western Refining  (WNR) . I see a base pattern stretching back to February. WNR has made a strong percentage move off its June lows, but further gains are likely in the first half of 2017. In the short run, WNR is pulling back, so the question is where and when we should be looking to buy WNR.

In this one-year daily chart of WNR, above, we can see a possible head-and-shoulders bottom formation or a rounded bottom. What we call the pattern is not that important. What is important is recognizing a bullish setup. Prices turned up with more vigor in early August, breaking above the declining 50-day moving average line. The slope of the 50-day quickly turned positive and is still pointed up. The 50-day crossed above the 200-day in October, generating a belated golden-cross buy signal. The On-Balance-Volume (OBV) is key to this bottom and it began to rise in June. A rising OBV line tells me buyers have become more aggressive and are paying up to get long WNR. The Moving Average Convergence Divergence (MACD) oscillator is pointed down and suggests WNR is vulnerable to further weakness.

In this three-year weekly chart, above, we can see WNR is above the 40-week moving average line, but the line is still pointed down. The OBV line on this timeframe is pointed up, as is the MACD oscillator, which is signaling an outright buy.

Bottom line: I would let WNR finish its correction. Maybe we get to see prices in the $26-$24 area and that may be our buying opportunity.

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