Clarify Ambiguous Charts With Secondary Indicators

BP

BP (BP - commentary - Cramer's Take) is an excellent example of the benefit of using secondary indicators like money flow and accumulation-distribution to flesh out an ambiguous price pattern. BP has been working on forming a bottom, and the downtrending resistance line has given way to a sideways consolidation phase.

But money flow has remained positive, and the accumulation-distribution line made a higher low in November vs. October, even though price made a lower low. That nonconfirmation is just now becoming evident in price movement. I'd wait for BP to break above $40 before taking stock, and I'd also watch volume carefully. Stocks can fall on low volume (an indication of passive buyers), but any sustainable advance needs heavier volume.

ChevronTexaco

ChevronTexaco (CVX - commentary - Cramer's Take) is being squeezed now, but conflicting signals make me a bit cautious on this stock. I like the energy sector and the oil group, but money flow and volume concern me because they're not confirming the recent tag of the upper Band.

On the positive side, the stock has been under steady accumulation, although even that indicator has receded a bit along with price over the past few months. But this stock bears watching, solely because of the volatility squeeze. Oil stocks are likely to jump around a bit as the posturing between the U.S., the U.N. and Saddam Hussein dominate the headlines.

ExxonMobil

ExxonMobil (XOM - commentary - Cramer's Take) is a relatively slow mover, and I might be a little early on this one. Price has been avoiding the outside Bollinger Bands and has been making lower highs and higher lows. It just can't get out of its own way.

I suspect that any push outside the Bands will be easy to catch. The stock just isn't that volatile. Watch for volume to confirm the move. The bullish money flow is hinting that ExxonMobil may start gushing soon, but wait for it. There's no reason to get caught in the sideways meat-grinder that we've been seeing.

Occidental Petroleum

Occidental Petroleum (OXY - commentary - Cramer's Take) has been weak, but money flow and accumulation-distribution have been strong. What gives? It's all a function of price and volume. We're seeing heavier volume on up days than on down days, and up days also see closing prices nearer the daily highs. This impacts both indicators. Still, Occidental is range-bound, and I'd only be getting long if it tagged the upper Band on heavier-than-average volume. I think it will happen, but my crystal ball didn't come with a calendar. Wait for it!

ConocoPhillips

Chartus Ipsa Loquitur! ConocoPhillips (COP - commentary - Cramer's Take) has heavy accumulation, bullish money flow, an ascending triangle, a bullish relative strength index and fairly tight Bollinger Bands.

I'll see you on Wednesday. Meanwhile, be careful out there.

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Dan Fitzpatrick is an independent trader in stocks and options, and is a member of the Market Technicians Association. His columns focus on quantitative strategies for trading and investing. At time of publication, Fitzpatrick held no position in any stocks mentioned, though positions may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Fitzpatrick cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to [e-mail].