Medium term
Trade view / 16 February 2016 at 9:49 GMT

Exxon Mobil path of least resistance is higher

Trader / TheSteadyTrader.com
United States
Instrument: XOM:xnys
Price target:
Market price:
Background

Shares of integrated oil giant Exxon Mobil Corp (XOM:xnys) are higher by nearly 4% year-to-date. That's not what one would expect considering the daily headline news of calamity in the oil markets. A relative strength trade is thus setting up in this stock.

Oil and oil related stocks had an awful time since mid-2014 but while the price of oil until recent days has trended lower, some of the large integrated oil companies have seen their stock show great relative strength in recent months.

As a result of the steep drop in shares of Exxon Mobil stock from 2014 into 2015, which resulted in about a 35% haircut, the stock became extremely oversold last August. The MACD momentum oscillator on the weekly chart showed oversold readings last seen during the 2008 financial crisis. The stock has since bounced and with last week's continuation buying now looks prepped for another leg higher.

Exxon mobil share over the last ten years, weekly chart
Exxon Mobil

Source: Saxo Bank. Create your own charts with Saxo Trader click here to learn more


On the daily chart we see that XOM stock last week also pushed back above its red 200 day moving average for the first time since last November. When XOM stock pushed above this moving average last November it so in already near-term overbought conditions, This time the stock is doing so from a notable higher low versus last summer's lows and in less overbought conditions. 

Exxon mobil since last summer, daily chart
Exxon Mobil
Source: eSignal

Management and risk description

Although the correlation between shares of Exxon Mobil and the price of oil has broken down in recent months, for near-term time-frames and particularly on the back of any major newsflow on oil this correlation could spike again.

Parameters

Entry: Buy the stock or CFD at $81.50 or higher

Stop: $78

Target: $87

Time horizon: 2 - 4 weeks

— Edited by Clemens Bomsdorf

Non-independent investment research disclaimer applies. Read more
4y
fxtime fxtime
Serge XOM can also be a correlated trade set up for arb' with usdcad !
4y
benlouro benlouro
agree on this trade. start to bild positions on energy
4y
Serge Berger Serge Berger
@fxtime interesting observation, agreed that could work

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