The American company engaged in hydrocarbon exploration in the United States, the Middle East, and Colombia, as well as petrochemical manufacturing in the United States, Canada, and Chile, Occidental Petroleum Corporation (NYSE: OXY), seem to be getting ready for a price surge according to its latest charts.
#1 Cup and Handle Pattern Breakout: The daily chart of OXY shows that the stock has broken out of a cup and handle pattern. This is marked in the chart below in purple color. A cup and handle pattern is a consolidation and breakout pattern. A breakout from this pattern indicates that the stock may move higher. Typically, stocks retrace to the breakout level again before continuing the upmove.
#2 MACD above Signal Line: The daily chart shows that the MACD (light blue color) is currently above the MACD signal line (orange color). This typically indicates a bullish setup.
#3 Above MAs: The stock is currently above both 50-day as well as 200-day SMA, indicating that the bulls are in control.
#4 Bullish ADX and DI: The ADX indicator shows bullishness as the (+DI) line and the ADX line is greater than the (-DI) line and the ADX line is rising from below both (+DI) and (-DI). This points to a possible upmove in the near-term.
#5 Bullish Aroon: The value of Aroon Up is above 70 and Aroon Down is below 30 in the daily chart. This indicates possible bullishness.
#6 Downtrend Broken: From the weekly chart, we can see that the stock had broken out of the prevailing downtrend and has now started moving higher. This is a possible bullish indication.
#7 MACD above Signal Line: In the weekly chart as well, the MACD line is above the MACD signal line which is a bullish signal. The stock is also trading above its 50-week SMA, indicating that the bulls are still in control.’
#8 Bullish ADX and DI: The weekly chart shows that the +DI line is currently above -DI line and the ADX line is moving up. This is a possible bullish indication.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of OXY above yesterday’s high, which translates to a price of around $22.80.
TP: Our target prices are $27 and $35 in the next 3-6 months.
SL: To limit risk, place stop-loss at $19.90. Note that the stop loss is on a closing basis.
Our target potential upside is 18% to 54% in the next 3-6 months.
For a risk of $2.90, our target rewards are $4.20 and $12.20. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the cup and handle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any new government rules or regulatory changes in its sector.
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