Chevron’s Double Dip Pullback
Crude oil cleared $100 a barrel on Wednesday. But maybe someone forgot to tell Chevron Corp (CVX).
Shares of Chevron pulled back by more than 2% in Wednesday’s session, closing lower for a third day in a row and dragging the stock into oversold territory. In fact, Wednesday’s oversold close was the stock’s first since CVX climbed back into bull market territory one month ago.
While Wednesday marked the stock’s first oversold close in a month, CVX has come under the sway of sellers in recent weeks. A two-day sell-off that failed to take the stock into technically oversold territory nevertheless lowered the price of CVX by more than 5% at the end of October. But buyers stepped in after that second lower close to bid shares of CVX higher for the next five days in a row, sending the stock up by well over 4%.
The positive edge in Chevron Corp is already significant (more than 1%), and rivals the positive edge in other major integrated oil stocks that were also being aggressively sold on Wednesday such as Exxon Mobil (XOM), BP (BP) and ConocoPhillips (COP).
Importantly, the selling in CVX has taken the stock below its 200-day moving average, which may be a deal-breaker for some more conservative traders and investors who prefer to exclusively buy stocks on the “bull market side” of the 200-day moving average.
But with CVX still within 1% of its 200-day, the stock’s significantly oversold condition, positive edge and multiple consecutive closes may be enough to encourage buyers to return to the market. If so, then traders could find themselves positioned at a relatively low entry price in an oversold stock that is otherwise in bull market mode.
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David Penn is Editor in Chief of TradingMarkets.com