After channeling in a defined trading range over the past several years, shares of Imperial Oil Ltd. (IMO.TO) appear to have finally broken out past prior resistance following the Israel and Iran attacks on oil infrastructure and GPS disruption in the Strait of Hormuz. Over the past week alone, IMO.TO is up 9.70% and 26.34% year to date. This move has pushed its relative rank higher within the SIA TSX 60 Index Report, with the stock rising 18 spots in the past week and now sitting at position 17 in the report. This is just below the coveted SIA favored green zone, which is illustrated in the attached SIA matrix position chart. The attached point and figure chart shows trading around the $110 level, having moved through the top line resistance at $107.31 and breaking above the established trading range of $84 to $105. With the SIA matrix overlay tool engaged, it is also possible to visualize the buildup in relative strength from red to yellow. Absolute performance is beginning to translate into relative performance, a key measure used in SIA methodology. Using the prior trading range as a guide to build a new set of resistance levels, SIA can extrapolate the vertical count out to $118.48 based on the breakout column of Xs. If the entire trading range is used to build a vertical count, the projection could reach $136.10. Both targets still represent excellent potential rewards. On the risk side, point and figure support levels can initially be found at the three box reversal level of $101.12, which aligns with the psychological $100 level. Further support may be found in the $86.31 to $84.61 range, highlighted in the light green box.
Turning to the daily candlestick chart, the Bollinger Bands with two sigmas are engaged to assess both the strength of the breakout and to capture the potential short-term impact of the invasion of Iran. Moves of this nature can often be knee jerk reactions and may normalize as conditions stabilize, so it may be prudent to remain aware of this outlier effect. While it is not unusual for a name with increasing relative strength to ride the upper band, the current reading is well outside the two sigma range. This makes it worth monitoring for any return to more typical levels. That said, the breakout appears valid, and any pullback to support may offer a more favorable risk and reward setup. Two additional readings from the chart include the SIA sector rank, which currently places SIA Energy in the unfavored category, and the SMAX reading, which is a perfect 10 out of 10. Taken together, these metrics highlight the strength of Imperial Oil both against the other stocks in the SIA TSX 60 Index Report and within the Canadian energy complex. IMO.TO has a current dividend yield of 2.61%.
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