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Channeling Profit With Chevron

Technical analysis of stocks depends on interpreting patterns in price charts in order to decide how to play a stock.

One pattern, in particular, is pretty common and profitable.

It’s called an “upward channel.”

An upward channel basically means that the price of a stock is bouncing back and forth between resistance and support levels, while generally trending upwards.

Prices don’t always stay exactly within the lines, but they’re still great indicators of when to either go long or short with your investment.

Here’s an example using Chevron Corp. (CVX), which demonstrates this pattern beautifully.

A Clear-Cut Case

By following the upward channel trend shown on the chart below, you can get a better idea of when to buy and sell.

A Predictable Pattern

The red line represents the resistance level – the price at which the stock finds more selling pressure than buying pressure. When CVX hits that line, it’s probably a good time to short the stock.

Conversely, the green line represents the support level – the point at which a stock finds more buying pressure. That typically drives the price higher, indicating a good time to go long.

All you have to do to find these support and resistance levels is look at relative highs and lows on the chart. Next, you connect as many of these points as you can with a straight line. And once you connect a line with three points, the line becomes a trend.

You can do this with any stock. But in Chevron’s case, you can clearly see that the support and resistance lines are nearly parallel. That, and the fact that each line has four points, suggests this is a particularly powerful trend.

You may also notice that the price of Chevron is about to break the support line in the very near future. So if the trend holds true, it’s probably a good time to buy CVX, especially if the stock drops below $118 per share.

Now, that’s not a guarantee – it’s just an indicator. You still have to weigh things like fundamentals and circumstances, as well. But I will say that Chevron is a solid company.

It’s one of the biggest fish in the energy sector. It’s also well integrated in the oil and gas industry, from exploration and production to downstream activities like refining. And its operating margins are among the highest in the sector.

This information can really enhance your gains.

For instance, imagine if you picked up on this trend in mid-May, right around the time of the third red circled point, and shorted CVX, and then bought to close at the end of June – you’d have done quite well for yourself in a relatively short period of time.

So keep an eye out for the upward channel, and make the most of it when you can.

And “the chase” continues,

Matt Senseney