In an oil patch held hostage by constant, but always changing geopolitical and macroeconomic risks, the price charts in ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) are quite clear. For bullish investors it’s better to buy shares of CVX rather than XOM stock, if you’re interested in exploiting total returns on your investment. Let me explain.
From weekly inventory reports, to overseas conflicts in oil bearing regions like Iran or the daily shifts in investor sentiment regarding the U.S. China trade war– it’s hard to keep up with what’s moving the price of black gold. And with shares of the US Oil Fund ETF (NYSEARCA:USO) up 2.50% Wednesday, but challenging the 200-day simple moving average, I’m glad to let other bulls and bears fight that battle.
As I’ll explain below though, if we can get past what some say is a coin flip situation for sector giants ExxonMobil or Chevron, the technical case clearly favors owning CVX over XOM stock for those seeking total returns down the road.
XOM Stock: Neutral
Shares of ExxonMobil have been a cherished Dividend Aristocrat for many income-seeking investors. And in 2019, that’s still the case for XOM stock. But on the monthly chart shares are showing some concerning price action which shouldn’t be ignored.
A longstanding dividend-adjusted uptrend of around 17 years in duration was breached late last year. In of itself, the brief failure of support was only modestly bearish. But the subsequent inability of XOM to break through its inverted triangle pattern resistance formed near the stock’s all-time-highs set back in 2014, definitely raises some flags. Don’t get me wrong though. I’m not writing XOM stock off as a bearish play at this time.
As the annotated chart also reflects, the fact XOM shares failed to fully breakdown this spring and remain near the midpoint of the inverted triangle could be construed as a positive for ExxonMobil bulls. Still, I’m no gambler, even if the company is paying other investors 4.55% to sit tight. At the end of the day or at least until another monthly candlestick forms to tell me otherwise, I’m advising readers to stay neutral on XOM stock.
CVX Stock: Buy
Chevron is also a Dividend Aristocrat. But unlike XOM stock, shares of CVX are showing much healthier, longer-term price action. This is offering investors the opportunity for a total return purchase where capital gains can far outstrip the company’s attractive-looking forward income stream of 3.86%.
Bottom-line, despite Chevron’s runner-up status in market capitalization, CVX stock has distanced itself technically from XOM the past few years. This can be seen in Chevron’s more recent all-time-high notched in January 2018 and its uncontested uptrend dating back to 2002.
Now and following 18 months of mostly lateral and well-supported consolidation work since hitting all-time highs, Chevron shares are in position to be purchased. And it doesn’t take a rocket scientist or a petrol engineer to appreciate the recommended strategy for total return seeking investors is to put CVX stock on the radar for buying on a pattern breakout through $126.38.
Disclosure: Investment accounts under Christopher Tyler’s management do not own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.