Tesoro Corporation (NYSE: TSO)

Tesoro Corporation engages in refining and marketing petroleum products in the United States. It operates in two segments, Refining and Retail. The Refining segment refines crude oil and other feed stocks into transportation fuels, such as gasoline, gasoline blend stocks, jet fuel, and diesel fuel, as well as other products, including heavy fuel oils, liquefied petroleum gas, petroleum coke, and asphalt. This segment also sells refined products in the wholesale market primarily through independent unbranded distributors; and in the bulk market primarily to independent unbranded distributors, other refining and marketing companies, utilities, railroads, airlines and marine, and industrial end-users in the western United States. It owns and operates 7 refineries with a combined crude oil capacity of approximately 675 thousand barrels per day. The Retail segment sells gasoline, diesel fuel, and convenience store items through company-operated retail stations, and third-party branded dealers and distributors in the western United States.

To review a current H&S pattern on Tesoro’s stock, please take a look at the 1-year chart of TSO (Tesoro Corporation) below with my added notations:

TSO

TSO had rallied from a low of $35 in November to a peak of $65 in May. Over the last (6) months the stock had created a very important level of support at $50 (purple), which was also the “neckline” support for the H&S pattern. Above the neckline you will notice the H&S pattern itself (blue). Confirmation of the H&S occurred yesterday when TSO broke its $50 “neckline” support. So, the stock should be moving lower overall from here.

Keep in mind that simple is usually better. Had I never pointed out this H&S pattern, one would still think this stock is moving lower simply if it broke below the $50 support level. In short, whether you noticed the pattern or not, the trade would still be the same: On the break below the key $50 level.

The Tale of the Tape: After embarking on a nice rally higher, TSO confirmed a head & shoulders pattern. A short trade could be placed now, or could be entered on any rallies up to or near the $50 area.

Would you like assistance in making your TBS trades? If so, email me at Christian@yolopub.com and let’s talk about working together one on one!

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT