Exxon Mobil Corporation: XOM Stock Is a Dip You Should Buy

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After a good rally off the September/October lows,, many energy stocks — specifically, oil companies — over the past two weeks have begun to mean-revert lower. A major reason for the renewed weakness in oil stocks has been a continued rise in the U.S. dollar, which has a deflationary effect on commodity prices (hence, lower oil).

Beat the BellShares of Exxon Mobil Corporation (NYSE:XOM), however, remain well-positioned for a renewed rally into year-end or early 2016 and are now nearing a good technical support area that active investors could take advantage of.

I last discussed my near-term bullish view on XOM stock on Sept. 16. At the time, I highlighted the technically exhausted/oversold readings, coupled with bullish options action and an attractive 4% dividend yield, making the case for an attractive buy point in the stock around the $74 area.

A few weeks later, Exxon had reached my first upside target in the high $70s, and by early November even reached the high $80s.

XOM Stock Charts

On the below multiyear chart, I plotted XOM stock and in blue overlaid the price of oil as represented by the United States Oil Fund (NYSEARCA:USO). The positive correlation between the two assets in recent years is clear, but note the divergence since September. XOM stock rallied strongly both in absolute and relative terms while the USO ETF bounced, but has since almost retraced back to its August lows.

This relative strength in XOM stock is a promising sign that the worst of the drop off the 2014 highs is likely over and that the August lows were an important medium-term inflection point.

xom stock charts weekly
Click to Enlarge

On the daily chart, we see that after XOM stock rallied out of the consolidation wedge and triggered my buy signal, it quickly rallied above its 50- and 100-day moving averages (yellow and blue lines, respectively). In early November, Exxon shares made a vertical overshooting move and also pierced through their red 200-day moving average, which likely sucked in the last short-term rally chasers and left the stock morbidly overbought.

Over the past six trading days, the stock dropped about 9%, back below its 200-day moving average but into a good reference area of support. This confluence support area is made up of horizontal support (black line) as well as the 50- and 100-day moving averages.

XOM stock charts
Click to Enlarge

Exxon stock has now entered this confluence support area that spans from about $77 to $79.50, which is where active investors now want to look for bullish reversal days (i.e., seller exhaustion). Upon the next bullish reversal day, active investors could buy the stock for a first target back near the early November highs in the high $80s.

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Successful trading and investing starts with a plan. Download Serge’s essential trading plan, The Essence of Swing Trading e-book. As of this writing, he did not hold a position in any of the aforementioned securities.

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