timwest

BUY Crude Oil (OIL), SELL SHORT Chevron (CVX)

BATS:CVX   CHEVRON CORPORATION
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How is it that crude oil is so far out of sync with the price of energy stocks?

This chart shows you very clearly how they move together, but at times they reach extremely far apart. After an extreme, they come back together in a dramatic fashion.

I can't wait until Tradingview has ratio charts so you can see what the ratio chart looks like.

The lift in crude oil futures today and the drop in CVX could be the beginning of the closing of this very wide spread.

I believe the upside here is 10% over the next month with a downside risk of 5%. Since this is a pairs trade, don't just cherry pick one side of this trade because I don't know which side of the trade will generate the profit. It could be that CVX falls and OIL stays the same.

Technical Tim

Wed, Oct 10, 2012 12:40AM EST
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Comments

CVX announced lowered guidance before the market opened and the stock gapped and traded down sharply from this extreme. I doubt anyone had a chance to put this trade on. Either way, I may look to XOM instead as that has the same or a similar chart setup.
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http://stockcharts.com/h-sc/ui?s=OIL%3ACVX&%3Bp=D&%3Bb=5&%3Bg=0&%3Bid=p03846123698 Here's the link to see the ratio - note how the macd is turning up from oversold. Note how the RSI is approaching neutral and looks to be at a new 22-day high.
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