Trade view /
08 March 2016 at 9:13 GMT
On February 16
, I shared a trade idea to buy shares of integrated oil giant ExxonMobil Corp (XOM:xnys) as the stock showed both relative and absolute strength, coupled with promising price action on the charts. The continued rise in the price of oil on Monday resulted in XOM stock breaking out of a consolidation pattern to the upside. This requires an update to the trade.
To recap and as a reminder, note that ExxonMobil stock from its 2014 highs down to the 2015 lows retraced about 76.40%, which is an important and last-resort retracement from a Fibonacci analysis perspective. The rally since has seen the stock make an orderly series of higher lows that now also broke the stock past/above the 2014 diagonal resistance line.
On the daily chart, we see that Monday's 2.32% rally in XOM stock pushed it above this diagonal resistance line. This came on the back of a multi-week consolidation phase that saw the stock rest above its red 200-day simple moving average.
While the stock remains at the whims of price action in oil, for the time being, the consolidation phase above the 200-day and below trend resistance followed by the subsequent breakout on Monday is constructive and could see the stock rise back into the high $80s before it's all set and done.
Management and risk description
Reward to risk on this trade is now worse than it was a few weeks ago but still warrants a trade. Somewhat reduced size would be prudent risk management.
Entry: buy the stock or CFD at $83.50 or higher.
Time horizon: 2-3 weeks.
— Edited by Martin O'Rourke
Non-independent investment research disclaimer applies. Read more