Shares of oil and gas major Chevron (NYSE:CVX) hit an all-time high on Tuesday, reaching $180.96 intraday and finishing the day at $174.66. Multiple themes have helped boost the energy supermajor's stock.
The most obvious fundamental catalyst for CVX has been all over the headlines this week: EU members and the UK have finally reached an agreement to ban Russian oil. As well, albeit closer to home, legendary investor Warren Buffet put his stamp of approval on Chevron after his holding company, Berkshire Hathaway (NYSE:BRKa) significantly increased its position in the stock, purchasing $25.9 billion worth of additional shares in the first quarter, making the energy firm BRK's fourth-largest equity holding.
Additional positives for Chevron shares: last week the US Treasury department renewed CVX's license to operate in Venezuela, despite Biden administration sanctions on the South American country. And two weeks ago, Goldman Sachs included Chevron in its list of 18 recommended stocks with which to weather inflation.
Finally, in February, CVX agreed to acquire Renewable Energy Group (NASDAQ:REGI), though the deal hasn't been finalized yet. Should it proceed, this would add a green energy segment to Chevron's operation, part of a major overhaul the oil major is undergoing as it optimizes processes significantly while cutting ties with Russia.
Here's how this rich array of headlines may have affected the stock's supply and demand technicals.
The stock just completed an H&S Continuation pattern. Yesterday's mid-session selloff weighed on Chevron, pushing the price away from a fresh record close after it had posted an all-time intraday high.
During the last two sessions, the price developed a Bearish Engulfing pattern. The structure is a short-term omen after bulls stuck their necks out, only to have the bears cut their heads off. Tuesday's higher opening price indicated bullish enthusiasm, but that turned sour when the price later erased more than two days of gains.
Nevertheless, despite the bearish pushback, the neckline held fast, with the price closing precisely on the neckline, matching the Mar. 10 high price, at the point the neckline begins. The MACD remained in a bullish cross, with the short MA holding above the longer one. However, the RSI's own H&S bottom completion fizzled, falling back beneath the line, giving pause to cautious traders.
Trading Strategies
Conservative traders should wait for the price to close above $181, then for the following return move to verify the neckline's support before risking a long position.
Moderate traders would wait for the same upside and the following downside for an entry closer to the neckline if not for further proof of demand.
Aggressive traders could enter a long position now.
Trade Sample
- Entry: $174
- Stop-Loss: $170
- Risk: $4
- Target: $194
- Reward: $20
- Risk-Reward Ratio: 1:5