In our last analysis (Money Morning dated 6 May 2009) on Woodside Petroleum (ASX: WPL), we were anticipating a further move to $50 in case the price action would clear the immediate resistance at $43.
Actually the stock cleared the level of $43 but failed to rise to $50. It failed just above $46 at mid-May. That’s a resistance level that has been holding for a long time now as several attempts failed to clear it since November 2008. On the weekly chart, the MACD remains positive but has lost some momentum in the last few weeks and may peak soon…
Because the stock is capped at $46 and the price action has been contained in a tight trading range, the bullish velocity has weakened. This trading range is limited by the upper band of the weekly Bollinger bands on the upside, and by the moving average of the Bollinger Bands on the downside.
On the daily chart: we clearly identify the horizontal resistance at $46…
After the stock reached this level in May (point B), it corrected back towards $39 before rebounding sharply in July. Another attempt failed in early August (point C). The first time this level had been identified as a resistance, it was last year when a bear-market rally peaked in November (point A).
The other resistance at $50 remains of course in place it corresponds to a previous strong support level valid last year.
Currently the price is consolidating as the indicators are moving sideways and are quite neutral. However the main risk is clearly on the downside as the upside is immediately limited at $46. The current price is around $44.30. The 20-day moving average (in blue) has peaked and already curved downward, confirming that the recent momentum is probably over. A cross below the 50-day moving average (in green) would trigger a bearish “trend-following” signal that would probably accelerate the correction.
In this scenario, a retracement towards $40 would become the objective.
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Shame we didn’t get this two days ago when it was valid. WPL reached a high of $48.15 and closed at $47.53 today.