On Friday, Chevron Corp. (CVX) shares initially plunged after second quarter results. The company reported a loss of $0.78 per share compared to a profit of $0.30 a year ago, the negative print resulted from impairments and other non-cash charges totaling $2.8 billion. On adjusted basis, the company reported a profit of $0.35 per share, a beat over the analyst consensus of $0.31. Revenue missed with a $28.0 billion print, expectations were for a $29.8 billion result. The California based company noted that second quarter results reflected lower oil prices and our ongoing adjustment to a lower oil price world. The upstream business recorded impairment and other charges on certain assets where revenue from expected oil and gas production is expected to be insufficient to recover costs. The downstream business continued to perform well. On the earnings call, the company noted Q3 production will be impacted by a large number of turnarounds. They anticipate to exit 2016 with production rate at 2.65-2.67M barrels per day.
Shares initially traded sharply lower to $99.25 but respected the 100-day SMA and ended the session up 0.68% to $102.48. Price action on the Chevron daily chart shows the downward correction may resume if price is unable to recapture the 50-day SMA, which currently trades around the $102.91 level. If oil prices resume their bearish trend, we could see Chevron shares come under pressure. Major support will come from the 200-day SMA, which trades at the $94.31 level.The Trade: Sell CVX at $102.75, with a stop loss at $103.75 and a take profit at $98.75. The Risk/Reward Ratio is 1:4