Since early October, crude oil has gone on a bit of a bullish rally. It’s not a full-fledged bull run, but it’s something worth nothing. Prices spiked on September 16th after the Saudi Aramco attacks temporarily crippled the Saudi oil industry, before falling dramatically when reserve oil flooded the market.
On October 3rd, oil almost hit a new 30-day low. The next day, the rally began.
As of today – November 18th – crude oil is up 11% from the early October lows.
And during the rally, plenty of oil-dependent companies flourished.
That includes drilling operators, oil industry service providers, and especially gas station brands – all of which made new monthly highs.
However, over the last few days, the oil boom has started running out of steam.
Resistance was encountered last week at $58.00 per crude oil CFD (contract for difference), causing the oil sectors to hit the skids as well.
And one company, a gas station, saw its shares plummet, creating an opportunity for bears to finally go short.
In the daily candlestick chart above, you can see that Chevron Corp. (NYSE: CVX) has formed – you guessed it – another triangle breakout. These have become all too common in 2019 with the general market, and as the chart is showing us today, it’s extended to stocks that are more commodity-driven as well.
The upper trendline, which traces the standout highs over the last few weeks, is relatively flat. We actually almost had an upwards breakout a few days ago, but had to re-draw the line when a new high was made two candlesticks back.
Instead, a downwards breakout occurred when today’s candlestick traded below the bottom trendline, which connects the standout lows from the last few weeks. And while the stochastics have already sunk dramatically, we still have a reading above 20 – suggesting that there’s far more selling to be done.
As a result, it might make sense to go short on CVX (at around $118.00) if it drops below the current day’s low by a significant amount. With the presence of a lower high and lower low, this trade has some major influences that could pull share prices down further.
Which, of course, is exactly what we want to see in a short trade setup.
In fact, there’s so much negative momentum here, that oil doesn’t even have to dip for CVX to fall. So long as oil doesn’t go on another rally, CVX could still get crunched over the next week or two.
So, as the week progresses, keep an eye on CVX’s movement. If share prices decline from here, a major plunge could be coming shortly thereafter – independent of what happens in the “will they, won’t they” trade war that’s spoiling the bull market.