Statoil ASA: STO Stock Is Setting Up for a Powerful Move Toward Much Higher Prices

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STO Stock: This Wave Structure Is Exceptionally Large

2018 is turning out to be a completely different trading environment than the one that characterized all of 2017. So far, 2018 has been characterized by high volatility, wild market swings, and the market indices having not made a new high in what feels like an eternity. These characteristics are the complete opposite of the characteristics that defined the trading environment in 2017.

One might come to the conclusion that this market action is the beginning of worse things to come, and this may be a legitimate possibility. But as long the major market indices stay perched above key levels of price support, I can only contradict this bearish notion.

While everyone is focused on the unnerving market action, I have found a bright spot within the market. I stumbled upon it because even in this turbulent market environment, I continue to look for stocks that are geared toward higher prices. In recent weeks, I have noticed that a large number of energy stocks were making my list. After taking a closer look, I noticed that the energy sector was quietly staging a bullish move, which was going largely unnoticed.

Statoil ASA (ADR) (NYSE:STO) stock was one of these energy names that continued to surface. Based in Stavanger, Norway, Statoil stock has been performing extremely well in 2018, outperforming the S&P 500 by a wide margin.

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The following Statoil stock chart captures this exceptional level of outperformance and highlights a number of indications suggesting that STO can sustain this move toward higher stock prices:

Chart courtesy of StockCharts.com

As you can see, Statoil stock is currently forging new year-to-date highs. Any time a stock makes a new high, it is a very bullish indication. And this notion is magnified given the turbulent market environment, which has caused many stocks and sectors to sell off.

I added the indicator in the upper panel in order to quantify the outperformance that has occurred year-to-date, and I am pleased to point out that STO stock has outperformed the S&P 500 by an incredible 20.76%.

I believe that this transition toward higher prices is likely to continue because this move has been well supported by volume. I highlighted the volume bars in the lower panel because they illustrate that volume was higher on days when STO stock was appreciating.

Substantially higher volume on days when a stock is appreciating suggests that a stock is being aggressively accumulated, which in turn implies that higher stock prices are likely to continue.

Statoil stock is coming upon a very important level of price resistance, which is highlighted on the following STO stock chart.

Chart courtesy of StockCharts.com

This STO stock chart, first established in April 2008, highlights a significant level of price resistance that resides at $27.00. This means this level of price resistance has contained Statoil stock from advancing for the last 10 years.

STO stock is likely to test this significant level of price resistance in the not-too-distant future, which would be the third attempt at breaking above this level. Perhaps the third time’s a charm, because if STO stock does manage to break above $27.00, it will open the door to much higher stock prices.

The following Statoil stock chart illustrates how, once resistance is broken, it will complete a wave structure that will suggest a sustained move toward higher stock prices:

Chart courtesy of StockCharts.com

This chart has been annotated in order to illustrate that the significant price resistance has defined a very large wave within a constructive wave structure.

This structure is responsible for creating and sustaining a trend and consists of impulse waves and consolidation waves. The impulse wave, highlighted in green, is advancing in nature and defines the period in a bullish trend where the stock price makes a sustained move toward higher prices.

Consolidation waves, highlighted in purple, are corrective in nature and define the period in a bullish trend where a stock price corrects and refrains from advancing. Corrective price action creates the necessary environment that once a consolidation wave is complete, an impulse wave can begin.

Breaking above price resistance—which, again, currently resides at $27.00—will suggest that the consolidation wave is complete, and that a new advancing impulse wave is in development.

This wave structure is exceptionally big, and as a result, I can only assume that once an impulse wave is initiated and begins its development, a similarly large and sustained move toward higher stock prices will follow.

Analyst Take

Statoil stock has been outperforming the markets this year, and it is approaching the $27.00 price resistance. Breaking above this level will imply that a very large move toward higher STO stock prices is likely to occur.