Hi everyone! Today I’ll be covering another energy company:
Devon Energy Corporation (NYSE: DVN)
A look at the weekly chart shows DVN in a multi-decade long falling wedge consolidation that cumulated in a breakout due to the supply chain crisis during the pandemic. It is currently consolidating in a smaller falling wedge pattern.
Here’s a closer look at the falling wedge pattern that has been forming. Note the bullish divergence that has been holding on the daily while the stock continues to make new lows. Recently, institutions have stepped up accumulation around 43, as seen from prior price action around the 43.04-43.94 zone, even in 2021.
From the looks of it, I am expecting DVN to retest 43.04, and possibly put in one final “capitulation” low at around 42, which is the 50% Fib retracement from the COVID-lows to the 2022 highs.
Following this low, I expect the stock to bounce very hard, along with oil. I note that hedge funds continue to go short on oil stocks, futures and options: https://www.reuters.com/markets/commodities/oil-prices-hit-by-resumed-hedge-fund-short-selling-kemp-2024-01-08/
This move is reminiscent of what we saw with TLT, where funds were net short on long-dated bonds, the most since the GFC.
Sentiment: BUY
Summary (with Price Targets - NFA):
Trading in a falling wedge consolidation pattern with a short-term measured move to 54.14 (~ Jul-Aug’23 highs) and a long-term measured move back to 79.40 (~ May’22 highs)
Accumulation can take place at current levels or any retests below 42.05, with funds net short on all oil asset classes
Oil stocks are usually slow movers and highly volatile, so any options positions should be at least 4-5 months out with appropriate sizing
Alright, that’s all for now. Moving forward, I will be posting less frequently, although you can expect me to post at least 1 to 2 times a week!
@CaptainTiger @MillionaireTiger @TigerWire @TigerEvents @TigerStars
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