"Humor is the tonic of life."

-- Christina Nikolov

Date: January 8, 2003

Opinion: Bullish

Current Price: $68.05

Target Price: $75.00, then possibly $80.00

Commentary:

After falling 26% between July 1st and July 24th, 2002 ChevronTexaco (CVX) settled into a trading range that has been narrowing over time. During the past six months, there were two upward spikes (August and October 2002) which became part of a downtrend. (chart #1)

Based on the stochastic oscillator, CVX is extremely oversold on the monthly chart. Since 1990, there were two other instances when the stochastic oscillator was this overextended on a monthly basis. Both preceded gains of at least 25% over the next three months. (chart #2)

The stochastic oscillator is currently overbought on a daily basis, so we would not be surprised to see some slight weakness short-term. With that in mind, there could be a pullback to as low as $66.74.

Support can be found at the base of the double bottom, which is just below $66. There is overhead resistance at $70, $75 and $80. We expect CBE to initially reach $32.10, but think there is a good chance the shares could eventually fall to an upside gap at $29.35. (chart #1)

To profit from an anticipated surge, we suggest the June 65 call (Symbol: CVXFM), which is currently offered at 6.00.  You might also consider the January 65 call (Symbol: LCHAM), which is currently offered at $8.00.  The January 2004 call is probably a better bet, since it will give the trade another six months for an extra $2.




Chart(s):

#1) ChevronTexaco (CVX)  - Six Month Daily Chart

Click the Chart for an Enlarged View

#2) ChevronTexaco (CVX)  - Thirteen Year Monthly Chart

Click the Chart for an Enlarged View