Stock Of The Day: Has The Stage Been Set For Occidental Petroleum To Move Higher?

Occidental Petroleum Corp OXY shares are oversold. They are also at support. And stocks that are oversold and at support tend to rally.

That's why our team of trading experts has identified it as our Stock of the Day.

Most of the time, a stock stays within its typical or average trading range. But if sellers are extremely aggressive and push the shares below this range, traders say that it is “oversold.”

This is important because it will draw buyers into the market. They will be expecting a reversion back to the average. This means a move higher and their buying could make it happen.

The lower part of the chart is the Relative Strength Index (RSI). When the blue line is below the horizontal red line it indicates oversold conditions.

As you can see that's the case now. You can also see that the last two times the stock was as oversold as it is now, big moves higher followed.

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Support is a large group of traders and investors who are looking to pay the same, or close to the same, price for new shares. For more than a year, there has been support for Occidental around the $56.00 level. As you can also see on the chart, the shares are trading close to this price.

Sometimes shares rally after they reach support. This happens when some of the buyers who created the support begin to worry that they may miss the trade.

They know that the buyers will go to whoever is willing to pay the highest price. They become concerned others will increase their bid prices. As a result, these concerned buyers increase the prices they are willing to pay.

Other concerned buyers see this and do the same thing. This could turn into a bidding war that results in the price moving higher.

This combination of being oversold while simultaneously being at support means there is a good chance shares of Occidental will rally.

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