After gapping lower on the bell shares of Chevron ( CVX - Get Report) are once again holding key support. At midday, shares have rebounded nicely off this solid area and are beginning to show signs that a near-term bottom may be in.
Chevron still has work to do, but investors should be encouraged by today's upside reversal.
Back in April, Chevron took out a very heavy resistance area on its way to new 2016 highs. The stock pulled back in May before putting in a slightly higher high in June, followed by another new high in July. Before the stock reached the July peak near $107.50, the $98.50 area provided solid support. Another important test occurred after a steep selloff during the second half of July. Once again, the $98.50 area held. This month, despite reaching a fresh five month low on the Sept. 16, Chevron stabilized and remains near a low-risk buy zone.
In the near term, Chevron investors should take on a much more positive view of the action. The stock should now be considered a low-risk buy between $99 and $98. On the downside, a close back below the $96 area would indicate that more downside is ahead. On the upside, an important hurdle will be the $101 area. A takeout of this level would clear last week's high, setting the stage for more upside in the process.