Devon Energy ( DVN) disappointed shareholders and investors Wednesday morning when they reported their Q4 numbers. Shares opened with a gap lower and have continued to slide. Let's check out the charts and indicators to see what could come next as prices are testing the early January low.
In this daily bar chart of DVN, below, I can see that prices have outlined a large equilateral triangle formation since June. Prices have made higher lows and lower highs the past eight months.
During this contracting period the trading volume has shrunk and the daily On-Balance-Volume (OBV) line has declined from early June. A weak OBV line tells me that sellers have been more aggressive than buyers.
The Moving Average Convergence Divergence (MACD) oscillator has oscillated around the zero line the past year and is currently below the zero line.
In this weekly Japanese candlestick chart of DVN, below, you can see the triangle formation I discussed above. Prices have spent the past two months below the 40-week moving average line. The weekly trading volume shows a decline as the trading range got narrower and narrower.
The weekly OBV line makes a peak in June but does not show a meaningful decline. The MACD oscillator is back to the zero line and poised to make a sell signal.
In this daily Point and Figure chart of DVN, below, I can see today's decline without a price gap and a downside price target of $49.
In this weekly Point and Figure chart of DVN, below, the downside price objective becomes $46.
Bottom line strategy: Traders and investors should avoid the long side of DVN and let this decline play out. We need to see where and when investors return as buyers.
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Another increasing concern for equities is that we are likely to see an 'earnings recession'.
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