Wednesday, April 25, 2012

Conoco Phillips (COP) finds price channel support

Markets traded within a relatively narrow band today (April 25, 2012), but prices were far from unchanged; indeed, the major indices held firm to significant but variable pre-market gains.

The S&P500 rose 1.4%, the NASDAQ jumped 2.3%, and the DJIA bumped up 0.7%. Headlines attribute today’s tech-led advance to a very positive Apple earnings report that was released after yesterday’s market close. Indeed, Apple (AAPL) rose 8.9 percent today.

Interesting price action occurred today in Conoco Phillips (COP) shares. The stock has been sliding over the past fortnight, and selling pressure was particularly intense during today’s morning trade before the stock pared losses in the afternoon to close down 1.2%.

Of note is that today’s intraday low in COP occurred at significant price channel support on charts of the security across various time frames, including representations with daily (1d), hourly (1h), and five-minute (5m) bars.

COP, 4 y 1d

On the daily bars chart, COP pierced and then closed exactly at price channel support that extends back to February 2011. This price channel support, which approximately coincides with today’s close of $71.02, is also the 200-day simple moving average (SMA) price.

Given that the 200 SMA is a default indicator of many market technicians, its significance is more likely to be self-fulfilling. Looking at previous encounters of COP with the 200 SMA reveals that the line does not have much explanatory power, however; price has often sliced through easily.

COP, 180 d 1h

The hourly bars chart shows that today’s intra-day low was quite near significant price channel support. While this channel is not ideally defined – some waves of market action overtake the price channel or fail to reach it – the lower line of the channel does nonetheless connect the two principal local minima since October 2011. That carries significant weight.

The oscillator between the 200-period SMA and price, which is graphed at the bottom of the above (180 d 1h) screenshot, also suggests that the current price level might provide support.

This indicator shows that the current price of $71.02 is more than $4.00 below the current 200-period simple moving average. The graph of the oscillator shows that such a bearish occurrence has only happened thrice since late August 2011, and that after each such instance, price promptly rallied hard.

COP, 20 d 5m
Conoco Phillips’ five-minute bars chart shows that today’s intra-day low coincided perfectly with a remarkably clean price channel that stretches back to April 2, 2012.

The sum of these charts is that, when COP shares traded near $70.53 around 11:25a CST today, there was a preponderance of evidence across various time horizons that the stock would find support. (It’s a pity that the security was not then in this trader’s sights!)

No comments:

Post a Comment