In January of 2016, just over a year ago, stock markets were in the throes of a pretty vicious mini bear market, or at least a very scary correction. Only one year later, we are now basking in the opposite environment wherein the popular stock indices appear to effortlessly make new highs every day with the buoyant tide lifting all boats.
At the time, one of the Dow bell-weathers, IBM, caught our attention for a number of reasons. The hook that made us consider a position was the convergence of Fibonacci levels and previous support points.
We could see that both of these chart points provided what we considered to be a low risk entry since our stops would be very close. It was a bittersweet trade because while the stock did rally from 120 to 128, it also fell back to stop us out at the 118 area before embarking on a run with the price hitting over 181 as of today’s close.
Nevertheless, other opportunities arose as the stock market marched upwards for most of the balance of last year. We bring this up because another large cap Dow stock sits at a possible cross roads as well and that is XOM. We include 3 time frames of the chart to give us the proper perspective:
The first chart above shows the daily prices and we can observe that this low price area of 81 to 83 has been tested at least three times. Clearly this is an area of significant support. Looking at the next chart showing weekly prices, we can see that this 80 dollar area was also an area of resistance before prices broke higher in 2016 before eventually falling back to this level again. Previous resistance is now support. We also note that prices are sitting right at the 200 period moving average.
Finally in the last chart showing monthly prices, we can see a somewhat different picture of XOM’s price action. It is still in a long uptrend with prices now sitting on the 50 period moving average. From a risk reward perspective, there are many compelling pieces of evidence to show that the 80 level is a major area of support.
The SCTR rating shows little in the way of enthusiasm of cumulative buying momentum, which is to be expected since the trend has been down. The CMF indicator however is moving up past the zero line into positive territory and RSI has turned up as well. Today’s closing candle can be considered a bullish engulfing bar which has positive implications. Even though XOM is not riding the strong upwave of the rest of the market, there’s enough evidence to compel us to enter a speculative position here in the 83 area with a stop at the recent low of just under 81.