Chevron Corporation - The Moment of Truth
Exit from the short-term channel, significant candlestick formation, and… the large price gap. What could such a mixture mean for the future of the stocks in the coming sessions?
Chevron Corp. – Technical Overview
Let’s start today’s analysis with the quote from the last commentary posted on Nov.29, 2023:
(…) Since the beginning of the year, stocks have been moving inside the red descending channel, but despite this fact, the correction of the previous upward movement is very shallow, as it did not even reach the first important Fibonacci retracement.
Additionally, the price continues to hold above the green support zone based on previous lows and the 38.2% Fibonacci retracement, suggesting that the room for further declines may be limited.
From today’s point of view, we see that December has improved the situation of the bulls as expected. Thanks to this month’s rebound, oil stocks have gained over 4,5% so far and moved away from the lower border of the red declining trend channel.
The volume is not very exciting now, but let's remember that we won't be able to evaluate it properly and draw any conclusions until after the last session of the month.
But before that happens, let's see how this price action has affected the medium-term picture.
Let's start by recalling what the technical situation was at the end of November when the last comment appeared:
The first thing that strikes me on the chart above is the multi-week consolidation (marked with orange) right over the solid support (at least at the moment of writing these words) - the green gap that was formed at the beginning of October.
Additionally, the CCI and the Stochastic Oscillator dropped to their oversold areas (the latter generated even a buy signal), which suggests that the space for declines may be limited and reversal could be just around the corner – especially when we factor in the fact that the lower border of the red declining trend channel (marked with dashed lines) is not so far from current levels and reinforces the area of the mentioned gap.
Looking at the weekly chart, we see that all the above-mentioned factors mobilized buyers into action, which brought a long-awaited breakthrough last week – the breakout above the upper line of the multi-week consolidation.
This is a bullish sign – especially when we consider buy signals generated by the CCI and the Stochastic Oscillator.
But is the road to the north as wide open as it might seem today?
Before we answer that question, let’s recall what was the short-term technical situation at the time of the last comment:
(…) the stocks are currently trading inside the very short-term blue rising trend channel.
The red gap created on Nov.7 remains in the cards, which in combination with the proximity to the next resistance (based on June lows) and the upper line of the blue channel suggests that as long as the bulls don’t manage to break above these levels, the way to the next important resistance zone (created by the big red gap from Oct.27 and the 38.2% Fibonacci retracement) is closed and (…) only an effective breakout above the nearest resistance zone can induce more buyers to return to the trading floor.
From today’s point of view, we see that despite several other attempts to move higher (in the following days after the last article was published) the bulls failed to break above the nearest resistance zone, which translated into a reversal and a comeback to the south.
Thanks to the sellers’ attack, the price slipped to the lower border of the channel in the first week of December, but despite this drop, the support withstood the pressure. This positive sign encouraged the buyers to return to the trading floor and triggered a rebound.
Although the bulls failed to break above the upper line of the channel, they managed to stop the decline before the sellers could get to the lower line of the formation in the previous week. They confirmed this show of strength on Dec. 13, shaping the bullish engulfing candlestick pattern, which encouraged the buyers to fight.
As a result, they finally managed to break above the major short-term resistances, which opened the way to the next important resistance zone. Thanks to the recent price action, the price tested not only the 38.2% Fibonacci retracement and the upper border of the big red gap from Oct.27 but there was no breakout above it.
What does it mean for the price?
Additionally, oil stocks increased to the area, where the size of the upward move is even bigger than the height of the blue rising trend channel (according to the technical analysis after leaving the channel, the minimum range of upward movement is equal to its height), which could encourage the buyers to take profits of the table.
On top of that, the CCI and the Stochastic Oscillator remain in their overbought areas (the latter generated even the sell signal), suggesting that reversal from current levels is just around the corner.
If this is the case and the bears come back to the market, we’ll likely see a decline to the previously broken upper border of the blue rising trend channel in the coming days.
I think the best way to sum up today's analysis of Chevron Corp. is to answer the question: is the road to the north as wide open as it might seem? In my opinion, it’s not because as long as the nearest important resistance zone remains in the cards, the road to the north is blocked, and a reversal is more likely than a further increase in prices in the very near future.
If you’d like to know what the current technical picture of crude oil is, what oil bulls are facing right now and where the bears might attack, I encourage you to subscribe to Oil Trading Alerts, where you’ll find the answers to these (and many other) questions.
See you tomorrow.