Exxon Mobil Corporation (NYSE:XOM) stock is up since Donald Trump’s election, and not just because CEO Rex Tillerson was nominated for Secretary of State.
The confluence that has pushed XOM stock more than 4% higher since the election includes agreements on production cuts from OPEC and non-OPEC members, including Russia, normalizing global crude oil stockpiles, rising demand from emerging markets (such as India) and a 15% spike in crude oil prices.
Oil prices couldn’t stay at multi-year lows forever, and the life-blood of the industrial complex appears to be working on a comeback. This bodes well for XOM stock, as it is on the verge of making a comeback itself.
Click to Enlarge After falling for most of 2014 and 2015, Exxon stock bounced back in 2016, topping out near $95. The shares hit a rough patch mid-year, but have mounted a comeback following the November elections.
XOM stock is now hovering near former support/resistance in the $87 to $90 region, with trendline support just below the shares at their 50-day and 200-day moving averages. The shares recent retreat to this support area could mark an excellent entry point for a long position.
Checking in with sentiment, analysts remain largely on the sidelines when it comes to XOM stock. According to Thomson/First Call, 19 of the 26 brokerage firms offering up an opinion on Exxon stock rate the shares a “hold” or worse.
Furthermore, the 12-month consensus price target rests at $88.30, a hair’s breadth above XOM’s current perch. With oil poised to move higher and take XOM with it, there is plenty of room for upgrades or price-target increases that could send the stock higher.
Options traders, meanwhile, appear to be betting on a rally. Looking out to February, XOM stock’s put/call open interest ratio rests at 0.70, with typically bullish calls in control over the next two months. In fact, call traders have their sights set on the Feb $92.50 strike, which sports peak OI for the series of 7,400 contracts.
Now, $92.50 seems like a lofty goal, but February implieds are pricing in a potential move of about 5% for XOM stock over the next two months. This places the lower bound near $82.50 and the upper bound just shy of $92.
A break above technical resistance at $90 could elicit a larger move than many options traders are pricing in, while support should hold firm in the $82.50/$83 region.