OXY has been in a downtrend since May2011 when the all-time high at 117.88 was made. During the past 2 years the stock has generated 3 subsequent rallies with consistent lower highs (106.48, 93.60, and the most recent to 88.74), which have kept the downtrend intact in spite of the uptrend in the indexes during the same period of time.
OXY generated a strong drop over a period of 5 months, starting on May2011, from the 117.88 high to the 66.36 low that was seen in Oct2011, and in the process broke a strong 1-year support level between $72 and $74, suggesting the stock had broken totally and would be heading lower. Nonetheless, the stock did not continue down as buying interest appeared at the lower levels and 1 week later the break of the $72/$74 support level had been negated, which in turn brought about a strong wave of buying that took the stock up to the 106.48 high and a retest of the all-time high.
OXY has now successfully tested the 66.36 low, as well as the $72-$74 support level, with a drop down to 72.42 seen in Nov2012 followed by a rally up to 88.74 which not only confirmed the retest was successful but in the process negated the break seen 4 weeks prior of the 200-week MA, currently at 86.25, also suggesting that the stock may be ready to turn the downtrend around.
To the downside, OXY will now show decent support at 76.59, which was a low seen in May of last year. That low was broken in November when the stock dropped to 72.42 but that drop was necessary as a retest of the 66.36 low as well as of the $72/$74 support level. Having generated a rally up to 88.74 "after" the 76.59 level was broken does suggest that 76.59 will now be considered decent support and unlikely to get broken if the stock has "turned the page".
OXY dropped down to 77.21 last week but ended up closing in the upper half of the week's trading range suggesting there is a good possibility that the drop may become a successful retest of the 76.59 level and that now the traders will begin keying on breaking the downtrend and starting a sideway to up-trend. Resistance will be found at the 200-week MA, currently at 86.25, as well as to the recent peak high at 88.74. A rally back up to the 200-week MA seems to be a high probability.
OXY fulfills the parameters of a stock that is still undervalued in a strong market and that has now done enough positive chart work to suggest that the downtrend may be ready to end.
Purchases of OXY between 77.94 and 78.29 and using a stop loss at 76.29 and having a minimum objective of 86.25 will offer a 4-1 risk/reward ratio.
My rating on the trade is a 3.25 (on a scale of 1-5 with 5 being the highest).