Shares of petroleum refiner Valero ( VLO) have been trading sideways since November. Prices are trading between the 50-day moving average average line and the 200-day moving average line. Will prices stay in this neutral zone or will they make an upside breakout?
Let's check the charts and indicators for clues.
In this daily bar chart of VLO, below, I can see that trading volume has been flattish or neutral until the middle of March. Trading volume surged higher in the middle of March and early April, but prices remain in their sideways trend.
The On-Balance-Volume (OBV) line has been weak since June and signals to me that sellers of VLO have been more aggressive than buyers for a long time. The Moving Average Convergence Divergence (MACD) oscillator is hovering around the zero line.
In this weekly Japanese candlestick chart of VLO, below, I see a mixed picture. Prices are trading sideways but still above the rising 40-week moving average line. The weekly OBV line has been stalled the past three months. The MACD oscillator has been weakening but it is close to a turn higher and a fresh outright buy signal.
In this daily Point and Figure chart of VLO, below, I can see a potential upside price target in the $175 area. A trade at $144 or higher is needed to refresh the uptrend.
In this second Point and Figure chart of VLO, below, I can see that the software is projecting a potential downside price target in the $101 area.
Bottom line strategy: Traders who are long VLO or looking to go long VLO should have a sell stop just below $120. A break of $120 is likely to precipitate further declines.
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A lot of downtrodden smaller stocks have rallied, but one day does not a trend make.
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