Where to Buy Chevron Should Shares Dip

The catalyst to the stock's decline Wednesday is the company’s $11 billion writedown.
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Chevron (CVX) - Get Report stock is under pressure Wednesday, down almost 1%.

The catalyst to the decline is the company’s $11 billion writedown. However, the worse-than-expected crude oil report on Wednesday also wasn't helping matters.

The report showed a build in inventories as stockpiles hit a seven-month high. The news sent crude oil sharply lower at first, but a bounce off its lows has it down just 1.2% on the day.

Still, a glut of supply continues to weigh on energy stocks, which have found it tough to keep prices elevated when so much production is readily available. Further, the decline in oil prices is quickly sapping the gains the commodity has seen in recent trading after OPEC negotiated production cuts in an effort to boost prices.

That came ahead of the Saudi Aramco IPO, which continues to push for a $2 trillion valuation.

In any regard, the decline in oil prices is hurting energy stocks, while Chevron’s massive writedown isn’t doing it any favors either. No wonder it’s Real Money’s Stock of the Day.

Let’s look at the charts to see where it can go from here.

Trading Chevron Stock

Weekly chart of Chevron stock.

Weekly chart of Chevron stock.

Above is a weekly chart of Chevron stock. As you can see, CVX stock has found resistance between $122 and $124 on the upside for the last two years. On the downside, support hasn’t been as dependable, but tends to come into play between $110 and $112.

With shares in the middle of the range now, it’s hard to be a buyer or a sell here. Particularly as Chevron stock appears relatively muted to Wednesday’s news.

Keep an eye on the 50-week moving average. Below that could send shares down into multi-year range support. Should it fail and CVX stock falls below $110, then a test of the 200-week moving average may be in order.

Daily chart of Chevron stock.

Daily chart of Chevron stock.

Above is a look at the daily chart as well. While the 50-week moving average is nearby, so too is the 50-day moving average and uptrend support (blue line). If they give way, buyers may get a chance to buy Chevron stock into range support. 

Put simply, traders should buy into support and sell into resistance until the price action says otherwise. Right now, Chevron isn't near either.