Shutterstock photo
Markets

Drilling down on Lukoil (LUKOY)

Shutterstock photo

Shutterstock photo

As we mentioned in our recent post, Russia's latest round of upheaval-spawned volatility created plenty of value opportunities in a list of the country's biggest companies. Traders can take a look at Neftyanaya Kompaniya Lukoil, otherwise simply known as Lukoil ( LUKOY , quote ).

LUKOY has been in a steady downtrend channel since hitting a high of $75.98 on March 7, making lower highs and lower lows and producing a distinctive Fibonacci wave to the downside.

Price movement has been using the 150-day moving average as resistance since crossing it back in May with a few failed attempts to break out above it.

The downward price trend can be verified using the 61.8% Fibonacci level as resistance confirming the 150-day moving average level.

Traders also may notice a reverse or bullish head and shoulder pattern -- albeit a small one -- forming over the past few weeks. On the chart above, the sold green lines encompass the left "shoulder" and "head" while the dotted green line represents the forming position of the still-hypothetical right shoulder.

Remember, we do trade on candlestick formations in the process of forming, but traders should be aware of the possibilities. There is no guarantee that any formation will materialize.

The fuel gauge - the blue dotted line below the chart nearby - is continuing lower, suggesting weak buying.

Volume in the past has ticked above average during the times the bears are in control and pushing price toward the bottom of the trading channel. This is a great indicator to watch for entry and exit points.

Traders can use the average volume as sign that price may be heading to the bottom of the channel to possibly form the right shoulder. The shoulder would be formed at the bottom of the channel and at the natural resting place of 18% and 27% Fibonacci extension levels. Either condition could nullify the other. Do not rush into a position, but let the price action play out.

For now, it appears the bears are in control of the stock price and traders should be patient and look for sound opportunities to enter.

A few possible scenarios:

* Price moves to the bottom of the channel and trades sideways for a few days, forming the right shoulder. At that point, traders can look for an upside target about 14 points, which would put LUKOY at the top of the channel. An increase of volume and strong fuel gauge create the possibility of a break above the 150-day moving average.

* As above, but LUKOY fails to break the channel. Trade the channel range and make a nice profit on both the long and short side.

* Price action fails to form the right shoulder and breaks below the trading channel.

Summary: Traders may want to consider waiting to see what transpires both on the technical front and the political unrest currently inflicting Russia. Look for entry points around the 61.8% Fibonacci support level or after the right shoulder firms up.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks

Latest Markets Videos