Oil and natural gas exploration and production giant ConocoPhillips (COP), along with the broader market rallied strongly off the June lows. On a daily closing basis the stock rallied just about 10% in a straight line, or, in fourteen consecutive up days. As an aside, the S&P 500 has now rallied nine straight days and if the index rallies one more day it would match the streak of September 1995. In other words, rallies of nine consecutive up days or more are rare and suspect to quick mean-reversion moves lower.
Through a twelve month lens ConocoPhillips (COP) has traded in an orderly up-trending channel, the top of which has once again been reached with this latest fourteen day stretch. In comparison to the other rallies from the bottom of the channel up to the top, the June-July rally has been the steepest and sharpest and thus reached the upper end of the channel the quickest. While the stock could easily extend a little further and peek outside of the channel, chances are gravity will soon kick in and push the stock toward a little mean reversion lower.
Also note however that the stock through a multi-year perspective remains looking good for higher prices, much like some of its peers.
To wit, Exxon Mobil Corporation (XOM) for example solidly held its 2011 up-trend during the latest pullback and now is re-testing a major resistance point, the October 2012 highs. Chances favor the stock eventually blowing past resistance, although in the near-term the stock’s June-July rally also looks too steep to sustain at this rate.
Once ConocoPhillips (COP) finally does cool off some, how far could if potentially fall? For now, a 50% retracement of the June-July rally would take it toward the $62 area and a 61.80% retracement toward the $61.20 level. As the longer-term picture for the stock still looks ok, personally I will be more interested in the long-side on this stock again after a little cooling-off period.