While the three day drop on oil stocks has been fantastic, there are some signs that a short term bottom has been reached. The charts on everything from Exxon, Chevron to even the Oil Service HOLDRs (NYSE:OIH) are saying this.
Exxon Mobil dropped from a double top high of $88.23. It hit a low today of $84.06. This low of the day matches up perfectly with a pierce of the 50 moving average on the daily chart and is just $0.25 shy of a key gap fill going back to April 19th, 2011. This range should be solid support for three days or so.
Chevron dropped from a high on Monday at $109.58 to a low today of $103.70. As CVX hit the low today, it is less than $0.50 away from the support base in early to mid April at $103.35. This should hold it for a few days and it is likely to see CVX bounce for two to three days.
Perhaps the best example of all is the OIH. This represents all the oil services as an ETF. The OIH has dropped for three straight days, falling into the mid March lows of $149.50. This level is major support for the ETF and should hold in the short term. This should get a solid bounce in the coming few days before ultimately going lower.
While many oil stocks are hitting key daily support levels, it is important to recognize that this is only short term support for a minor bounce. After this happens, oil stocks will fall further to the downside. Ultimately, daily 200 moving averages should be hit which are far below current levels.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
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