Dow component Exxon Mobil Corp (XOM) has lagged a key rival for the last three months, stuck within its 2016 trading range while co-component Chevron Corp (CVX) has lifted to a 2-year high. That underperformance may end this week after non-OPEC oil producers agreed to cut supply, triggering a strong rally that’s lifted the WTI futures contract to 17-month high above $54.
CVX will still retain an income advantage with a healthy 3.73% dividend yield, compared to 3.37%, but the expected nomination of XOM CEO Rex Tillerson as President-elect Donald Trump’s Secretary of State will keep a spotlight on the company for years to home, similar to V.P. Dick Cheney’s Halliburton Co (HAL) connection during the second Bush administration.
XOM Long-term Chart (1993-2016)
The stock cleared 1987 resistance near $12.50 in 1991 and entered a powerful uptrend that gathered momentum during the second half of decade, reaching $43.41 in 1999. The subsequent topping pattern posted a final high at $47.48 in October 2000 and broke down in 2002 but selling pressure dried up a few weeks later, with the July 2002 low at $29.60 marking the lowest low in the last 14 years.
The subsequent uptrend cleared the 2000 high at the end of 2004, giving way to a two-legged advance that ended in July 2007 in the low 90s. A decline into 2008 broke a 15-month trading range in August, joining world markets in the economic collapse, with selling pressure ending at 56.23 during the October crash. A bounce into 2009 failed, yielding a 2010 test at support that attracted substantial buying interest while posting a double bottom reversal.
It took two years for the uptrend to reach the 2008 high, ahead of a 2013 breakout that posted an all-time high at $104.76 in July 2014. The stock sold off through new support a few months later, triggering a failed breakout that marked the first stage of a major downtrend. Selling pressure continued for more than a year, with the August 2015 mini flash crash ending the decline at a 4-year low in the mid-60s. It’s recovered in two broad rally waves since that time, stalling just below the .786 Fibonacci selloff retracement level in the third quarter of 2016.
XOM Short-term Chart (2014-2016)
The daily view highlights the decline into the August 2015 low, with the bounce into November stalling at 200-day EMA resistance and giving way to a higher January 2016 low. It mounted the moving average in February and spent two months building a rising base on that level, ahead of a secondary rally that stalled above 95 in July. It stair-stepped into the September low at $82.29 and has spent the last 2-and-a-half months carving the last stage of a basing pattern with resistance at $89.50.
The stock is set to break out at Monday’s opening bell and trade into the 90s for the first time since July 28th. This price action should open the door to a continued uptick that tests the summer high while entering a second test at harmonic resistance centered at the .786 selloff retracement (red line) in the mid-90s. That level marks the final barrier ahead of a bullish assault on the 2014 high.
On Balance Volume (OBV) has held well above the 2015 low, which marked a four-year low. It posted a higher January low, topped out over the summer and has been pulling back since that time in synch with price movement. This lockstep behavior will require modest but steady buying interest to clear the summer high and head for the 2014 peak along with advancing price.
The Bottom Line
Exxon has lifted into an excellent position to play catch with its blue chip rivals and rally into a key test at the 2014 bull market and all-time high above $100. Monday’s breakout could mark the first wave in that assault, with a short term target at the summer high above $95.
Disclosure: the author held no position in Exxon-Mobil or Chevron at the time of publication.
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