Exxon’s Big Stock Spill
With oil stocks like Chevron Corporation (NYSE: CVX) and ConocoPhillips (NYSE: COP) trading at or near two-week highs, what is Exxon Mobil (NYSE: XOM) doing selling off for four days in a row?
To be fair, many of these stocks sold off a bit heading into Friday’s close. And Exxon isn’t the only major integrated oil and gas company that is underperforming the sector. Shares of Total SA (NYSE: TOT), highlighted in Wednesday night’s 7 Stocks You Need to Know newsletter (click here to subscribe for free) is trading midway between recent highs and lows at it advances from oversold territory. The same is true for Royal Dutch Shell (NYSE: RDS) which reversed to close lower by more than one and a half percent after bouncing on Thursday.
But the selling in Exxon, in its fourth consecutive day as of Friday’s close, stands out in the group. And if history and statistics are any guide, then while the current weakness in the stock is good from a short-term trading perspective, even further weakness may be even better.
Heading into trading on Monday, shares of Exxon Mobil have a positive edge in the short-term of 1%. The stock has finished twice in oversold territory, and is trading at its lowest level since mid-February. From a perspective of buying weakness and selling strength, so far so good.
But from a ratings perspective, with Exxon earning a neutral 6 out of 10, traders want to wait out the sellers in the stock a little longer. While a stock like Exxon may struggle to earn major ratings upgrades to consider buying” status of 8 out of 10 or higher (the highest rating the stock has earned in months is a 7), the fact of the matter is that for a stock like Exxon, even a rating of 7 out of 10 can hint at a significant potential for short-term outperformance.
The last time XOM earned a 7 out of 10 rating, for example, was on the final day of January. At the time, shares of XOM had pulled back for four days in a row – six out of the last seven – trading from new, short-term highs to new, short-term lows and finishing in technically oversold territory above the 200-day moving average. Over the next week, Exxon Mobil rallied by more than 3%, closing higher for four out of the following five days.
Exxon could move higher on Monday without pulling back further, much less earning a ratings upgrade due to additional short-term weakness. But for short-term traders and active investors looking to trade markets when the edges are truly on their side and the trading winds at their backs, having the patience to wait for the right kind of pullback with a given stock can be its own reward.
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David Penn is Editor in Chief of TradingMarkets.com