This energy stock is forming a classic bullish cup-and-handle pattern
(See the video above for Jay’s complete chart breakdown.) It’s no secret energy stocks have been on a tear this year. The State Street Energy Select Sector ETF (XLE) is up 53% year-to-date, more than double its nearest competitor in the State Street Technology Select Sector ETF (XLK) . However, the rally in big oil has not been a straight shot higher. When we break down the charts, we see a great opportunity in a major player within the space: ConocoPhillips (COP) . When making this call, we did not factor the company’s coming earnings results on Thursday. Historically, big oil isn’t too volatile on earnings days as the underlying trend wins out. In this case, we want to focus on that trend which gives us a great risk/reward scenario. Technically speaking… The daily chart presents a fairly textbook bullish cup-and-handle formation. After spending much of the year carving out a broad rounded base, shares established resistance around $130-$135 before a smaller rounded handle formed in September and October. A convincing breakout above $135 followed, sending shares to fresh highs with little historical overhead resistance remaining. Using the roughly $33 depth of the cup, the traditional measured move projects an upside target near $168. Momentum certainly supports the bulls. RSI has maintained readings above 70, reflecting considerable buying strength, while MACD remains comfortably above its zero line. However, MACD is beginning to flatten, suggesting the rally could pause if geopolitical tensions ease and oil prices retreat. A pullback toward the former $130-$135 resistance zone would offer an important test of whether that ceiling has become a new floor and a good buying opportunity where we can manage risk. Zooming out… The breakout becomes even more impressive. —Jay Woods with Chase Games DISCLOSURES: None All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
