With a market capitalization of $27 billion, Cenovus Energy, a leading Canadian integrated oil and natural gas company, has faced a challenging year, reflected in its stock performance, which has declined by -3.17% (see attached table). While this decline is not massive, it represents an opportunity cost of 19.66% when compared to even the S&P/TSX Composite Index, which shows a +16.49% return. This underperformance has positioned CVE.TO stock near the bottom of the SIA S&P/TSX 60 Index Report for the year, limiting its appeal within the broader universe of opportunities. Today, we will review the stock's current technical attributes, as well as its critical support and resistance levels. Given that Cenovus’s primary product is crude oil, we will also take some time to update the WTI Crude Continuous Contract (WTICRUDE) chart.
Turning first to the chart of WTI Crude, we can observe a steady decline in price from the peak levels in 2022, when prices surpassed $100. Since then, prices have stabilized below triple digits and have consolidated within a range between $80 and $60. These trading ranges are illustrated on the attached 2% chart of WTICRUDE, where we have highlighted a green support zone near current levels at $63.99-$65.27. A break through this level, followed by a print of $62.73, would result in a triple bottom, putting the chart in a precarious position with limited support below it. Initial support could materialize around $59.11, with further support much lower at $47.54.
Technically, the crude oil chart is weak, with an SMAX score of 2 out of a best possible score of 10, indicating a poor near-term outlook. If prices rise, resistance levels become significant. The first level of resistance is at the 3-box reversal level of $73.50, followed by heavier resistance in the $78.00-$81.15 range. These levels, in conjunction with the support zones, create an intermediate trading range between $62.73 and $78.00, with a tightening wedge forming between $62.73 and $73.50.
Turning to Cenovus Energy, we observe a similar pattern to crude oil, which may be key to monitor should the commodity price break its support levels. Also trading within a defined range over the past several years, CVE.TO is capped by overhead resistance, first at the 3-box reversal level of $22.77, then at 3-year resistance at $24.65, and finally at the top zone around $27.21.
From a support standpoint, there is a defined zone between $18.68-$19.82, with little support below these levels until the trend line at $15.02. CVE.TO currently has no near-term relative strength, as measured by the SMAX score of 0, which compares the stock against other asset classes such as cash, bonds, commodities, currencies, and equities.
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