Shares of energy giant Occidental Petroleum (OXY) are higher in pre-market activity here on Thursday on reports that investing icon Warren Buffett is adding to his stake in the oil company. Let's check out OXY's charts.
In this daily bar chart of OXY, below, we can see that prices have been pulling back this month and have declined below the 50-day moving average line. The slope of this shorter lagging indicator is now turning lower. The slower-to-react 200-day moving average line is still rising and intersects around $44. The trading volume has been increasing slightly during June's pullback and the On-Balance-Volume (OBV) line has been declining. A weak OBV line suggests that sellers of OXY are more aggressive than buyers. The Moving Average Convergence Divergence (MACD) oscillator is pointed down and crosses the zero line. Professor Graham did not introduce Mr. Buffett to these indicators.
In this weekly Japanese candlestick chart of OXY, below, we can see a top reversal pattern in June. Candles do not give you price targets but prices declined into a band of support (prior resistance) in the $60-$55 area. The two most recent candles show us lower shadows to indicate that traders are rejecting the lows. Was this Buffett's doing? The slope of the 40-week average line is positive. The weekly OBV line is in decline. The MACD oscillator has crossed to the downside for a take profit sell signal.
In this daily Point and Figure chart of OXY, below, we can see the software is projecting a potential downside price target in the $45 area. A trade at $59 will start to improve the picture.
In this weekly Point and Figure chart of OXY, below, we see a potential target of $37.
Bottom line strategy: Despite his age, Warren Buffett has a longer investment timeline than I do. Warren will buy more shares of a company as the stock declines, but I prefer to buy on strength. Different strokes.
In my last update on OXY
on May 16 I wrote, "Our OXY recommendation is working out nicely. Too bad so many people are paying for our investment results at the gas pump. Continue to hold your purchases of OXY. Raise sell stops to $54. $87-$88 is our first price target and $112 is our longer-term objective."
Prices have not reached our recommended $54 stop so continue to hold. Thanks, Warren.
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