Shares of Exxon Mobil Corporation (NYSE:XOM), while still higher by about 10% for the year, have tumbled nearly 10% off their mid-July highs. This most recent mean-reversion move lower came on the back of a less-than-stellar earnings report and a renewed slide in the oil price.
While I am not one to blindly buy into falling stocks, XOM stock is finally starting to near a more interesting buy area for the first time in several months.
When Exxon Mobil reported its latest quarterly results last Friday the company missed both top- and bottom-line analyst estimates as its quarterly profits fell for seven quarters in a row, down 60% on a year-over-year basis.
The hurt continues to be put on Exxon’s top and bottom line due to still-low demand and new global gasoline supplies, which is pushing up supply. You might ask — if Exxon’s top and bottom line are so bad, then why is the stock still up 10% for the year?
For one, XOM stock, along with the broader market in the January/February period, may have been technically oversold and as oil begin to lift out of the abyss so too did oil related stocks.
Secondly and at least equally importantly, the global chase for yield gave dividend-paying U.S. large-cap stocks a good lift as investors starved for yield gobbled up these types of stocks. XOM stock as of Monday’s close now sports a 3.5% dividend yield, which still looks attractive relative to the paltry yields available in the U.S. bond market.
XOM Stock Charts
Moving on to the charts, on the multiyear weekly view we see that XOM stock’s steep ascent off its summer 2015 lows a couple of weeks ago bumped into an area of technical resistance and promptly rejected lower.
In blue I also overlaid the price of oil as represented by the United States Oil Fund LP (ETF) (NYSEARCA:USO). We can see that the recent slide in the USO ETF also correlates with the drop in XOM stock, which is to say that while the correlation of the two assets is by no means perfect, all else being equal, a sliding oil price will likely continue to weigh on XOM stock.
On the daily chart we see that XOM stock after the 10% slide off the July highs is now once again nearing the lower end of the up-trending channel that I marked with the two black parallels.
The lower end of the channel, which currently comes in around the $84 – $85 mark, also coincides with the red 200-day simple moving average. Just like XOM stock was not one to chase higher into the July overshooting rally, neither is it a blind buy down here just yet.
Active investors and traders could look to see how the stock reacts in the mid $80s and if any notably strong bullish reversals take hold. Upon a strong bullish reversal (if and when) in the mid $80s XOM stock could once again resume its climb, particularly if the price of oil begins to stabilize again and bond yields remain low.
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