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Asset Watch

Will Buffett keep Occidental Petroleum in the limelight?

 

Thursday, August 11 2022, 08:10am GMT

Oil prices are languishing amid recession fears, and the threat of hawkish central banks is making energy the worst-performing S&P 500 sector over the last three months. However, with Berkshire Hathaway – the conglomerate run by Warren Buffett – showcasing unrelenting devotion to Occidental Petroleum, does the oil and gas giant have further upside?
In a regulatory filing on Aug. 8, Berkshire Hathaway revealed it paid about $391 million for nearly 6.7 million Occidental Petroleum shares between Aug. 4 and Aug. 8. After several other purchases in 2022, the conglomerate now owns 20.2% of reported shares outstanding.
Will Buffett keep Occidental Petroleum in the limelight

Source: TradingView

However, with a big move likely on the horizon, the technicals signal a large gain or loss awaits Buffett over the next month. Occidental Petroleum has made lower highs and higher lows over the last two months. As a result, a symmetrical triangle has formed, and the pattern often precedes sharp moves in either direction.

The last time the pattern emerged from March to June 2020, Occidental Petroleum broke higher and recorded a more than 50% gain before rolling over. However, that jump was off the COVID-19 lows, so it had already declined substantially.

But similarly, Occidental Petroleum recouped its 50-day moving average before the material spike in 2020, and the stock also achieved that milestone on Aug. 9.

So, should you follow Buffett or fade the rally?

 

Sources:

S&P 500 sector performance:

https://eresearch.fidelity.com/eresearch/markets_sectors/sectors/si_performance.jhtml?tab=siperformance

Buffett OXY:

https://www.reuters.com/business/berkshire-hathaway-boosts-occidental-petroleum-stake-above-20-2022-08-09/

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