Still bullish on ExxonMobil stock
Shares of oil-related stocks bounced sharply off their August and September lows along with the broader stock market while decoupling from the price of oil, which until earlier this week was still pushing lower. While headline news of more oil gluts was partially to blame for the still dropping price of oil, the surging dollar with the dollar index reaching par earlier this week, is the other issue facing the commodity.
- While I expect another big surge in the US dollar starting in the second quarter or thereabouts next year, in the near to medium term the dollar looks increasingly overbought. Dollar weakness should also translate into a bid in the price of oil for a while.
- Both investor sentiment and positioning is very weak in oil related stocks, which is to say that it would take little for these stocks to see another rally.
- As we see on the multi-year chart of ExxonMobil versus the price of oil (in blue) below, positive divergence has built up over recent weeks where oil related stocks rallied. This could be a leading indicator that oil too may soon see a bid and thus further spark a rally in these stocks.
Management and risk description
Entry: Buy the CFD or stock around the $80 mark
Target: $87.00, i.e. around the early November highs, as a first upside target
Time horizon: into year-end 2015 or early 2016
— Edited by Clare MacCarthy
Non-independent investment research disclaimer applies. Read more