Valero Energy Corporation (NYSE:VLO) ready to bounce more holding $33

Denver, CO, 07/15/2013 (Avauncer.com) –Valero Energy Corporation (NYSE:VLO) (Closed: $35.86, Up: 3.82%) surged to its 14 day high with huge volume on Friday. The daily range was big with low and high at $33.60 & $36.18 respectively. With this bounce, the correction from the March 2013 top at $48.97 seems to be over at $33.

The major rally had started from $16.40, the October 2011 bottom and went to $48.97. At $33, the subsequent fall has retraced exactly 50% of the whole rise. The last major swing low was made at $32.90 - $32.95 in the last two weeks of December 2012. The bottom is well supported by the multiple positive divergences in RSI, on the daily time frame. The low $33 on July 3 was lower than the previous swing low of $33.27 made on June 24, but both RSI & MACD – Histogram made higher highs, showing the lack of bearish momentum.

Also, RSI is making a nice downward channel and with the rally of the last session, is hitting the upper boundary of the channel right now. A breakout of this indicator would give the rally more strength as RSI creates patterns in the same way as the price. As long as the price sustains above $34.80 - $34.90, the breakout remains on the cards.

Bears would want to limit any rally within $38.10 - $38.60. The last minor swing high and a big weekly downward channel containing the fall wait there to supply. For a sustained rally, bulls have to overcome that zone. A failure to breach $37.50 - $38.60 might drag the price all the way to a new low below $33.

Investors could buy this stock on dips with an eye on the level of $33. Holding this level, the stock may reach $42 - $43 in the next few weeks.