Exxon Mobil (NYSE:XOM) stock is getting ugly — real ugly. A 1% drop on Tuesday marked the eleventh straight down day in a row. Even worse, Exxon Mobil stock is down 21 of the past 24 trading sessions.
The descent has reached a point where even the most committed bulls are seeing their mettle tested.
Sure, we haven’t yet returned to the depths of the March low, but the fact that we are even approaching it should be alarming. Why? Because seemingly every other sector and asset continues to hold firm to their gains of the past six months. Let’s take an updated look at crude oil and the energy sector. Then we’ll outline the terrible technicals of Exxon Mobil stock.
Oil Is Slipping
In fairness to XOM, part of the weakness in energy stocks is due to crude oil rolling over this month. From the August peak of $43.78 to last week’s trough of $36.13, black gold slipped 17.5%. Along the way, it shattered the 200-day, 50-day and 20-day moving averages, officially reversing the uptrend that had been in place since April.
Given the strong link between oil and energy stocks, it is understandable that the likes of Exxon Mobil would be under pressure. And yet, at $38.50, oil is still miles away from this year’s low. By contrast, XOM stock has almost given back the entirety of its recovery. Moreover, the stock has been falling since early June, which was long before the weakness showed up in crude.
The disconnect between the two has been on full display this week as well. Oil scored a modest 3% rally on Tuesday. But did it boost Exxon Mobil? Not a bit. The wounded giant still fell 1%. The relative weakness adds to the reasons you should be concerned about XOM.
Exxon Mobil Stock Charts
The persistent weakness is on full display in the weekly time frame. It is a stark reminder that not all industries have enjoyed the glorious recovery seen by tech stocks. By declining back to $36, the year-to-date loss in Exxon Mobil stock has grown to 48%. All major moving averages continue to barrel down on the price. The 20-week moving average, in particular, was a thorn in the stock’s side throughout the summer. Despite a lengthy tussle, prices weren’t ever able to gain the high ground.
And here we are, falling for the sixth week in a row.
There isn’t any support until $30, so that’s the next downside target for the bigger picture.
But what about that big, juicy dividend? Does that make it worth the danger of buying this falling knife? In short, no. There is no denying the nearly 10% yield is the ultimate consolation price if Exxon treads water for the next year. But will it? Certainly not if the current trend continues. What good is scoring 10% in cash flow if the stock falls 30%? You’re still down money! And that, ultimately, is the problem with investing based on the dividend alone. The stock needs to stop sinking first.
The death knell to me was when the $41 support zone finally gave way. It killed the trading range and spelled the resumption of Exxon’s long-term downtrend. Ever since then, fishing for a bottom has been extremely painful.
How to Trade XOM Now
I am as interested in buying as the next guy, but we have to see signs of a trend reversal first. Until then, I suggest patience. As for the bearish side of things, I do like playing Exxon Mobil on the short side, but it’s challenging to advocate a new entry here. The reward to risk ratio leaves much to be desired given its oversold status. I’d wait for a multi-day rally into the descending 20-day moving average before deploying bear trades. That’s the better setup.
On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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