Shares of energy stocks, i.e. the energy sector of the S&P 500, has shown both absolute and relative strength in recent days versus the broader market. Within this space, shares of Exxon Mobil (NYSE:XOM) have shown good strength and XOM stock now looks poised to move higher toward a well-defined upside price target.
As I always point out in this here column, money in the stock market at the margin is made where relative and absolute strength is found. To wit, while the energy sector of the S&P 500 has underperformed the broader market over the past few weeks, in the last few days new relative strength has emerged, and that is something I want to respect from a trading perspective.
XOM stock, being a large component of the energy sector, has shown good strength in recent days and that led me to dig into its charts below. So you know, Exxon Mobil also sports a nice 4%-plus dividend yield that a more intermediate-to-longer-term investor might like.
XOM Stock Charts
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Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the multiyear weekly chart, we see that XOM stock’s lows in late December coincided with well-defined horizontal support from 2015 and 2011. It is also noteworthy, however, that since its 2014 highs this stock has only made a series of lower highs.
While I like the stock higher for a trade here, I do want to respect this series of lower highs, until proven otherwise.
Click to Enlarge
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see that XOM stock in late January, following its latest earning report, gapped higher out of a multiweek sideways consolidation range and back above its yellow 50-day simple moving average.
Most recently on Feb. 12 the stock flashed a B2 Reversal Buy signal and now looks poised to move higher toward its red 200-day moving average as a next upside price target, which currently comes in around the $79-$80 area.
While this recent relative strength in XOM stock and the energy sector as a whole is no guarantee this stock can’t trade lower, if we take the constructive technical picture into consideration I feel good about this set up.
A strong bearish reversal and break back below $73 would be a last-resort stop loss for me in this particular trading setup.
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