Woodside Energy: Head And Shoulders

This story features WOODSIDE ENERGY GROUP LIMITED. For more info SHARE ANALYSIS: WDS

The Chartist reports a small head-and-shoulders pattern should keep momentum positive in the short term for Woodside Energy shares.

BOTTOM LINE

30/1:
Daily Trend: Up
Weekly Trend: Down
Monthly Trend: Down
Support Levels: $28.50 / $19.15 / $16.80
Resistance Levels: $39.58-$43.74

Calendar Events:
Report Date: February 26 2024 (estimated)  Ex-Div Date: T.B.A

TECHNICAL DISCUSSION

Reasons to be cautiously optimistic:
→ There is still speculation regarding a merger with Santos.
→ The merger could create a scale that could compete with majors. It could also improve free cash flow.
→ 4Q production benefited from completed North West Shelf & Shenzi maintenance in the 3Q.
→ A bullish reversal pattern has triggered.

We’ve been concentrating on the weekly chart of Woodside Energy ((WDS)) but this evening I am going to move down to the daily. Before we do, we need to refresh our memories of what’s been happening on the prior.

The only real pattern of interest is the rising channel that’s been evolving off the March 2020 lows. The rally commenced following some capitulation which appears to have locked in a significant low. The lower boundary of that channel has been breached which in effect means that diagonal support has given way.

Not ideal, but it’s not a major reason for concern when looking at this daily timeframe.

This chart looks choppy and messy, with plenty of wide-ranging bars and gaps around. It’s just a trait of the stock that’s likely to continue. However, even accounting for that, we can see that off the August 2023 highs an almost straight-line leg lower unfolded. It didn’t result in a major decline, but it’s the potency of the move within such a short period of time that’s caught our attention.

That’s the bad news. The better news is that since early December last year, buyers have stepped up. What’s also interesting is that on the way to making the recent pivot low, volume started to increase.

It’s something we always look for, as trends often reverse following the formation of volume bubbles. We can’t read too much into the volume during the turnaround, as it was during the Christmas/New Year holiday period. If we are to see a more substantial bounce, it must improve. Remember, we like to see low-volume retracements and high-volume uptrends.

The reason for flipping to this timeframe this evening is that a head & shoulders reversal pattern is in play. It is on the small side, but it’s still relevant.

As can be seen, the neckline was overcome yesterday meaning the pattern has triggered. There wasn’t a great deal of follow-through today but let’s not forget that oil took a breather overnight.

In other words, the lack of follow-through at this early stage is neither here nor there. If the pattern is to prove itself, the next significant leg needs to be to the upside. Anything other would be a reason for concern. However, it would take a push beneath the right shoulder at $30.29 to negate the bullish short-term case.

TRADING STRATEGY

If you are a short-term trader, the head & shoulders provides an opportunity. The strategy is to buy following a push above the recent high at $32.05.

We’ll place the protective stop beneath the right shoulder at $30.25. It’s an aggressive low-risk entry. We’ll use a trailing stop to manage the position.

Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).

This report may contain advice that has been prepared by The Chartist Pty Ltd (ABN 40 641 323 051). The Chartist Pty Ltd is a Corporate Authorised Representative (CAR No. 1282007) of Shartru Wealth Management Pty Ltd ABN 46 158 536 871, AFSL 422409. Any advice is considered general advice and has been prepared without taking into account your objectives, financial situation or needs. Because of that, before acting on this advice you should therefore consider the appropriateness of the advice having regard to your situation and your own objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. If the advice relates to the acquisition, or possible acquisition, of a product (other than a security e.g. a CFD) then the client should obtain the relevant Product Disclosure Document and consider it before making any decision about whether to acquire the product. Past performance is not a reliable indication of future performance. This material has been prepared based on information believed to be accurate at the time of publication. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information.

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