The shares of Occidental Petroleum Corporation (NYSE:OXY) have been burrowing deeper on the charts for the better part of 2019, slamming into a 14-year low of $37.25 earlier this month, and struggling against pressure at the $40 region. This week, along with the broader market, the shares have managed to break north of this area, but are running into more technical trouble that could stop OXY's attempted rally dead in its tracks.
To elaborate, the oil and gas concern just bumped into its 70-day moving average after a lengthy period below the trendline. According to a study from Schaeffer's Senior Quantitative Analyst Rocky White, over the past three years, six similar signals have occurred. One month later, OXY was higher only 17% of the time, and averaged a negative return of 6.94%. From its current perch at $40.38, a similar move would send the stock back towards its annual lows, at $37.58.
Plus, implied volatilities on the equity are at low levels. Occidental Petroleum's Schaeffer's Volatility Index (SVI) of 28% sits in the lowest quartile of its annual range. This means options players are pricing in relatively low volatility expectations right now. What's more, per White's study shows that an at-the-money OXY put option could potentially return 131% in the next 21 days. In other words, prospective put buyers could double their money on an expected 6.94% drop in shares.
Despite its 34.3% year-to-date deficit, the options pits have been overwhelmingly bullish, as evidenced by the security's 10-day call/put volume ratio of 5.61 at the the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than 89% of all other readings from the past year, too, suggesting that calls have been picked up at a much quicker clip than what's normally seen. Should OXY reverse direction, an unwinding of bullish bets could add even more pressure on the charts.