Although Exxon Mobil (NYSE:XOM) shares are still in the green year-to-date, things have not been so simple for Exxon stock. XOM has seen more swings than a playground this year. And the stock’s most recent rally now has it failing at a critical area of technical resistance on the charts where a good reward-to-risk trade looks to be setting up for active investors and traders alike.
An easy way to get lost as a trader and thus rack up unnecessary losses is by not having well-defined risk parameters. But there’s also an easy way to overcome this: look for trading opportunities where one’s risk is clearly defined on the charts. Given that around 70% of us are visual learners, the visual aid of well-defined stop losses on charts is a major help for market participants. This trade idea in Exxon stock offers exactly that, a clearly defined stop loss.
Any successful trader will tell you that risk management (the opposite of reward chasing), is what makes them profitable.
Exxon Stock Charts
To get started let’s look at the multi-year weekly chart where we see that XOM stock — in somewhat unspectacular fashion — has oscillated between the mid $60s on the lower end and approximately $105 on the upper end over the past decade. It’s also important to consider that since 2014, the stock has made a series of lower highs, but so far this has not led to lower lows.
Currently XOM stock is more or less smack in the middle of the narrowing trading range that I marked with the two blue lines. From this angle, it looks to be a 50/50 shot whether the stock will resume back to the upper blue line or drop down to the lower blue line.
Click to EnlargeIf we zoom in on the daily chart, however, we see that Exxon stock, albeit in the middle of the aforementioned bigger picture trading range, in the near-term has bumped up against a so called confluence zone of technical resistance. This confluence zone is made up of the stock’s red 200-day, blue 100-day and the yellow 50-day simple moving averages, all bunching together roughly around the $77 – $78 area. It is also noteworthy that this price area matches up with a 50% retracement of the selloff from the April highs down to the late May lows.
With all of these technical things coming together in one price area ($77 – $78), this offers us the exact, clearly defined risk we are looking for. In other words, should Exxon Mobil stock be able to push back above $78 and thus through the confluence resistance zone, this would be a clear stop-loss signal.
In my opinion, the path of least resistance for XOM in the near-term is to the downside and toward the $73 area as a next target.
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