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A year ago it seemed like all hell was breaking loose on the oil industry. Even oil majors like Chevron couldn’t escape the carnage. First it was the pandemic, which forced governments to close businesses and restrict travel. Then, the Russia-Saudi Arabia oil price war worsened the situation as the two countries failed to negotiate production levels.
The combination of these two factors resulted in the worst ever oil supply glut. At one point, it was estimated that daily global demand fell by over 30%, while the supply side remained unchanged. This, in turn, created a very strange phenomenon – the price of WTI crude oil with delivery in May went negative for the first time ever. Chevron stock, in the meantime, was in free fall. In the first three months of 2020, CVX fell from over $120 to as low as $51.60. Energy became the most hated sector in the S&P 500.
What A Difference a Year Made for Chevron Shareholders
But how quickly can things change in the financial world. Fast forward to March 2021, WTI is hovering above $65 a barrel and Chevron is up 111%. Can the rally continue? Judging from the Elliott Wave chart below, we believe it can.
A quick look at Chevron’s monthly price chart reveals a complete five-wave impulse followed by a three-wave correction. Taken together, the two patterns form a textbook Elliott Wave cycle, labeled I-II-III-IV-V-A-B-C. According to the theory, once the corrective phase ends, the larger trend resumes in the direction of the impulsive sequence.
And indeed, Chevron’s surge from below $52 to $109 so far looks promising. It is also interesting to note that last year’s bullish reversal occurred shortly after wave C touched the 61.8% Fibonacci level. Furthermore, if this count is correct, the bulls can keep pushing the price even higher.
Almost seven years after it reached a record of $135.10, Chevron stock seems poised to climb to a new all-time high again. Industry consolidation, higher oil prices and the reopening of the world economy should contribute to CVX’s strength going forward.
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