Expect drawdowns on Valero Energy as resistance coincide with overbought conditions


Motiur Rahman

Jun 12, 2022

Valero Energy has returned 82% year-to-date.

The stock has been boosted by the strengths in the energy sector.

The stock could fall back to $120 after topping $145.

As energy costs soared this year, sector stocks became a darling to many investors. Not only did the stocks preserve value in a falling market, but they also gave robust returns. Valero Energy Corporation (NYSE:VLO) is one such name that returned huge to investors. Year-to-date, Valero Energy has returned more than 82%.

Another recent development has been crucial to Valero and energy stocks in general. Reports emerged that President Joe Biden would suspend tariffs on solar panels. The move was well-received in the sector on expectations of boosts in local production.

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Valero has been boosted by the reports amid the strengths it was already enjoying. As energy prices continue to soar, Valero and peers remain viable holdings. However, we believe the stock faces pressure and could fall by double digits.

Valero Energy stock hit an all-time high above $145

Source – TradingView

Technically, Valero Energy stock is retreating after touching an all-time high above $145. The record high coincided with overbought conditions with the RSI at 80. Besides, a May rating from JPMorgan gave Valero a target price of $142. Already, this level has been hit, and investors could be exiting positions.

We believe the stock will go lower from the current level. We recommend selling the stock or cutting positions to buy lower. The stock will find support at $120.

Concluding thoughts

Valero Energy stock could retreat back to $120 as investors take profits. The stock is currently overbought, and investors should exit or cut positions. We, however, recommend the stock for investors looking for high returns on energy names.

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