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Devon Energy: ‘Golden Cross’ Awaiting

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May. 30 2019, Published 7:06 a.m. ET

Devon Energy’s implied volatility

On May 29, Devon Energy’s (DVN) implied volatility was 45.2%—11.2% higher than its 15-day average. On the same day, EOG Resources (EOG) and Apache (APA) had implied volatilities of 33.7% and 44.2%, respectively.

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Price forecast

In the next five trading sessions, Devon Energy’s share prices should close between $25.43 and $28.27 68.0% of the time. The forecast is based on Devon Energy’s implied volatility of 45.2% and assumes a normal distribution of prices. On May 29, Devon Energy closed at $26.85.

“Golden cross” awaiting

On May 23, Devon Energy’s stock price decisively broke below its 100-day moving average. On the same day, oil prices fell 5.7%, while the broader market fell 1.2%. The IEA reduced the oil demand growth forecast for 2019, which dragged oil prices on the same day.

Devon Energy’s 100-day moving average of $29.40 is the immediate resistance level for its stock. The price level is $1.13 above the upper limit of our forecast. On May 29, Range Resources stock closed 11.6%, 14.5%, 8.7%, and 15.9% below its 20-day, 50-day, 100-day, and 200-day moving averages, respectively. A stock falling below these key moving averages indicates weakness in the stock prices.

On the same day, Devon Energy’s 50-day moving average was 1.7% below its 200-day moving average. In technical terms, if the 50-day moving average moves above the 200-day moving average, the crossover is called a “golden cross.” Usually, a golden cross is followed by an upswing in prices. On May 29, natural gas’s 50-day moving average was 14.9% lower than its 200-day moving average. On the same day, US crude oil’s 50-day moving average was 2.9% higher than its 200-day moving average. In the last quarter, Devon Energy operated with a production mix of ~67.7% in oil price linked commodities and the rest in natural gas.

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