2 Points Chevron Bears Are Watching

Chevron Corporation CVX shares have rallied over 10 percent since a bottom two weeks ago, a move that's right in line with the broader equity market rally.

With oil prices still bouncing close to the bottom set a couple of weeks ago, can Chevron shares continue their upside push?

What The Bulls See...

• An enterprise value of $229.42 billion versus a market capitalization of $222 billion
• A price-to-book ratio of 1.42
• A price-to-sales ratio of 1.05
• 9.61 percent net profit margins that spin off over $37 billion of operating cash flow annually
• A strong debt-to-equity ratio of 15.22 percent
• A strong current ratio of 1.35
• A Treasury-beating 3.7 percent dividend yield

What The Bears See...

• A P/E of 11 that seems expensive when compared to 2015 growth estimates for revenue and EPS (of -3.4 percent and -1 percent respectively)
• A company that's strongly levered to the price of crude oil, which is still showing technical weakness overall

Technical Take

Technicians note that Chevron is likely in the latter stages of a wave “a” move higher of an overall “abc” correction to the upside. The estimated upside target for this move is $119.49.

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Once that level is tested, they note, a wave “b” move back down toward $111-$112 should commence. The ultimate upside resistance for wave “c” –- and hence the “abc” upside correction –- will be $124.96. That figure is subject to revision if and when Chevron finishes the anticipated wave “b” downside correction.

Overall...

Chevron appears to be similar to its peer, Exxon Mobil, in that it could have a bit more upside before a downside correction takes it slightly above the recent lows before moving back up again.