Wednesday, April 6, 2016

Why I'm Bullish XOM


Just a short technical session today reviewing a company that has shown its strength in the oil and gas industry. It's not hard to find reasons to be bullish Exxon-Mobil these days, but here's my technical analysis chiming in.

A first look at the chart shows a short-term bullish trend that started around the beginning of the month of February. In the first week, the price topped its 50-day then its 200-day moving averages gaining another $3 or $4. This trend was defined by a divergence of the oil major's price and the WTI spot price. This, in particular, is a very bullish signal as equities have been following the energy commodity closely (see the comparison of WTI and XOM before February). The MACD reversal indicator was very bullish in March with three crossovers touting reversals upward (but never breaking through). The next crossover, though, could result in resilient growth if supported by WTI. The RSI reads neutral momentum for the past couple months producing neither bullish nor bearish signals. Nevertheless, trendlines drawn using bottoms in February and March reveal acute bullish floors with at least three points of confirmation. Oil prices have slowed down, and XOM has settled as well. The waning volume might predict the development of a trading channel where the price will consolidate until it looks to break upwards.

Some key points:

  • The next time XOM price touches the 50-day moving average, look for a new support level to develop there
  • Based on Fibonacci ratios, another breakthrough could send price to
    • about $92 at 100% retracement
    • about $88.70 at 66% retracement
    • about $87 at 50% retracement
    • about $85.30 at 33% retracement
    • about $82 if no retracement
  • If the trend reverses downward, look for a support to be established at the 200-day average accompanied by oil prices in the low $30's

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