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ChevronTexaco Corp. is Stuck in a Trading Range

10/14/02 11:57:55 AM
by Kevin Hopson

ChevronTexaco Corp. has been stuck in a tight trading range the past few weeks. The stock's 50-day moving average, long-term downtrend line and a developing triple top formation are acting as resistance at the top of this trading range.

Security:   CVX
Position:   Hold

ChevronTexaco Corp. (CVX), a component of the AMEX Oil Index (XOI), has been in a clear downtrend since June of this year. ChevronTexaco did test downtrend resistance near the $81.00 level back in August. However, this ended up being the stock's recovery high after July's selloff so ChevronTexaco failed to overcome the $82.00 level, keeping the long-term downtrend line intact.

As luck would have, ChevronTexaco is once again brushing up against its long-term downtrend line, this time in the $73.00 to $74.00 range. Unfortunately, there are a few other technical developments that are standing in the stock's way. For example, CVX has been stuck in the $69.00 to $73.00 range over the past few weeks. Though the stock has found good support (triple bottom formation) in the $68.00 to $69.00 range, a developing triple top formation in the $73.00 to $74.00 range will likely add to downtrend resistance here.

Graphic provided by:
Additionally, the stock's 50-day moving average ($73.26) is stuck right in the middle, meaning that there are three different layers of technical resistance in the $73.00 to $74.00 range. Furthermore, even if ChevronTexaco can manage to overcome the $74.00 level, there is a significant build up of call and put open interest at the $75.00 strike price. In other words, the bulls and the bears will likely fight it out here.

However, ChevronTexaco does have a few things going for it. For one, the short-term momentum has turned positive, meaning that the stock should see higher prices in the near-term. Also, the relative strength index (RSI) and stochastics put in higher lows during the stock's recent bottom, which can be seen in the chart. Given these bullish divergences, a significant bottom may have been put in and higher prices could prevail.

As a result, investors should keep an eye on two key levels - $68.00 and $74.00 - to determine the direction of the breakout. For example, if ChevronTexaco can touch the $74.00 level intraday, the stock would give a short-term buy signal and the long-term trend would turn positive. On the other hand, if ChevronTexaco hits the $68.00 level intraday, the stock would give a short-term sell signal and the long-term downtrend would remain intact.

Kevin Hopson

Kevin has been a technical analyst for roughly 10 years now. Previously, Kevin owned his own business and acted as a registered investment advisor, specializing in energy. He was also a freelance oil analyst for Orient Trading Co., a commodity futures trading firm in Japan. Kevin is currently a freelance writer.

Glen Allen, VA
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Comments or Questions? Article Usefulness
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1 (least useful)


Date: 10/16/02Rank: 3Comment: Volume is not shown on this chart. Volume would give alot of insight as to the strenght of the stock as it approches resistance.
Date: 10/21/02Rank: 4Comment: 
Date: 10/22/02Rank: 3Comment: brief simple

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