Last week, Exxon-Mobil (XOM) made the news for trading almost a dozen consecutive down days, a string of losses that makes the stock stand out from the market. A week later and XOM now appears to have placed a tradable bottom as the technicals for XOM combine with the headlines regarding Syria to make a short-term bullish case for the shares.
Click to Enlarge For months, XOM has traded in migrating ranges as the stock has ranged between the $85 and $95 marks, following a number of technical buy and sell signals. The latest of decline triggered extremely oversold conditions as the price touched down to the $87, a point that also holds support from a chart perspective.
In addition to the technical support on XOM, there are signs that sentiment towards the shares has swung to a pessimistic extreme. Recently, short sellers have become active on XOM. Last month, the short interest ratio on XOM jumped to multi-year highs as short sellers bet against the company, a move that netted some gains. Now, with the stock bouncing from technical support, these short sellers will begin to close their positions out, adding to buying volume.
Finally, the headline risks appear to be in favor of the bulls now as the situation in the Middle East is once again causing concerns in the oil pits, a situation that generally benefits names like Exxon Mobil, Chevron (CVX) and others in the energy sector.
For now, our research suggests that the technical bounce in XOM should lead to a tradable upside target of $93, a move of nearly six percent for traders buying the stock near current prices. For those with the proper education and trading background, the October 90 calls, currently trading around $1.25 per contract, will offer a leveraged position that could provide returns in excess of 50% with the same target price of $93 for the underlying shares.
Trader X frequents national investment conferences and has developed several market analysis tools that harness the powerful combination of behavioral analysis and technical analysis. He has decades of experience as a registered broker.
But we can’t reveal the source of this trade. Trader X’s privileged insight means he needs to be careful. He must act anonymously. While his identity can’t be known, Trader X will pull back the curtain to the trades he’s discovered.