First up is Chevron (CVX), the $323 billion oil and gas supermajor. Chevron gets top billing today because it's had the highest correlation with the S&P 500 lately -- an unlikely pair given Chevron's hefty commodity exposure. But just like the broad market, Chevron is testing trendline support today, and there's a trade to be made in shares.
You don't have to be an expert technical analyst to figure out what's going on in shares of Chevron. The energy giant has been in an uptrend since mid-November (like the broad market), bouncing between well-defined trendline support and resistance levels all the way up. The ideal time to buy a stock in an uptrend is on a bounce off of support -- that's because trendline support is the spot where shares have the highest upside potential and the spot where downside risk (that is, how much you have to lose before you know you're wrong on the trade) is the smallest.Notice that I said that it makes sense to buy on the bounce. Trendlines do eventually fail, so waiting for Chevron to actually bounce off of support confirms that shares can still catch a bid at that level. Yes, waiting does mean that you sacrifice some small upside, but it also materially increases the probability of a winning trade.
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