Playing the Momentum Building in Valero

Published on Wednesday, 01 September 2010 07:04 Written by TradersHuddle Staff

New York, September 1st (TradersHuddle.com) - Shares of Valero Energy Corporation (NYSE:VLO) closed the trading session at $15.77 placing the price action in a very tight range, given that calculated support is set at $15.49 and the calculated resistance based on an algorithm of peaks and troughs is set at $16.30

Valero Energy Corporation (NYSE:VLO) is an independent petroleum refining and marketing company that owns and operates refineries in the United States, Canada, and Aruba. The Company produces conventional gasolines, distillates, jet fuel, asphalt, and a series of petrochemicals and lubricants.

Valero's stock price action indicates that both sellers and buyers are materializing very close to each other, which is indicative to a momentum building area, as the stock can resolve by breaking out of the tight range that developed.

Traders wanting to establish a position should place close attention to Valero's price action, as any movement outside its predefined range of $15.49 and $16.30 could grab the attention of momentum buyers, looking for a big movement in the price of the stock. Traders need to be aware that tight range resolution works both ways, hence, a move below support at $15.49 could spark above average selling. A tiered approach can be a good way to approach starting a position in Valero's, by establishing a starter position while the stock is in the tight range, and then adding to the position as it breaks and closes above resistance.