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ExxonMobil Corp.'s Trading Range Breakout

01/13/04 09:03:37 AM
by Kevin Hopson

ExxonMobil Corp. broke out of bullish consolidation pattern back in mid-December, indicating the potential for higher prices in the near-term.

Security:   XOM
Position:   Accumulate

During the second half of 2003, ExxonMobil Corp. found itself stuck in a trading range between the $35.00 and $38.50 levels. However, back in mid-December, the stock successfully cleared the $38.50 level, effectively breaking out of a six-month bullish trading range in the process. As a result, the stock looks poised for higher prices in the near-term. Though it may seem like I tend to focus on trading range breakouts, given the various articles I have written on this subject, I do not seek out these formations for my analysis. It just happens that this type of formation has been a common occurrence in the marketplace in recent weeks.

In any event, now that ExxonMobil has broken out of its long-term trading range, it appears that the stock could eventually make its way up to the $45.00 to $49.00 range. This is simply calculated by taking the number of times that the stock tested the upper channel line in alternate sequence (3), multiplying it by the width of the trading range ($38.50 - $35.00 = $3.50) and adding this figure ($3.50 x 3 = $10.50) to the bottom ($35.00) and top ($38.50) channel lines. When you do this, you come up with a price target of between $45.50 and $49.00.

One-year chart of ExxonMobil Corp.
Graphic provided by:
It should also be noted that market sentiment towards ExxonMobil, and integrated oil stocks in general, has been increasingly pessimistic during the recent move higher. More specifically, short interest for ExxonMobil increased to 24.81M shares in December from 19.50M shares in November. Overall, integrated oil stocks - as measured by the AMEX Oil Index (XOI) - saw their short interest climb by almost 19 percent during this period. Additionally, only 43 percent of the analysts covering integrated oil stocks currently have buy ratings on them. This is lower than the oil service group and the exploration and production (E&P) group, meaning that integrated oil companies continue to be out of favor in the energy sector. As a result, given the stock's recent trading range breakout and continued pessimism on the part of investors, I would look to accumulate shares of ExxonMobil in the near-term.

Kevin Hopson

Kevin has been a technical analyst for roughly 10 years now. Previously, Kevin owned his own business and acted as a registered investment advisor, specializing in energy. He was also a freelance oil analyst for Orient Trading Co., a commodity futures trading firm in Japan. Kevin is currently a freelance writer.

Glen Allen, VA
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