ExxonMobil (XOM) Technical Update

Today ExxonMobil (XOM) came out with news that profits dropped by 23% but that, despite the decline, earnings exceeded analyst expectations ($1.27 versus analyst expectations of $1.19).  Most important to you is how the stock reacted based on the earnings news.  In our January 25th article, we outlined our rational for considering XOM as a potential investment candidate.  Shortly after writing that article, the New Low Observer team took a 25% position in XOM with the intention of buying another 25% if the stock fell significantly below the initial purchase price.
The news about XOM's earnings has catapulted the stock  from the previous closing price of $64.43 to the opening price of $65.77, an increase of 2.08%.  As seen in the above chart, this has led to a technical situation know as a "window" (as graphically explained here)  in the realm of Japanese candlesticks.  According to the authoritative tranlation of Japanese candlestick analysis, Japanese Candlestick Charting Techniques by Steve Nison, windows formed as part of a potential rising trend "...reflects a market which is bottoming and whose price action forms a concave design and then a window to the upside opens.  It has the same appearance as a Western rounded bottom, but the Japanese bottom should have a window in an upmove in order to confirm the bottom" (1991; pages 113, 119).
The price movement so far seems to indicate that the direction for XOM is up, based on Nison's explanation of the window that has been formed.  However, there is also the concept of "windows" being closed (also known as "filling the gap").  The expectation is that XOM's price should revisit the upper extreme of the price prior to the creation of the window.  If the stock falls below the $64.43 level by a wide margin, that would indicate the the stock trend is going to be much lower.  While my focus is on the downside we should be cognizant of the upside potential or upside limits.
In the above chart we can see almost all of the prior windows and the points at which they were "closed."  The point that remains to be closed is the upper window for the low of December 9, 2009 at the price of $72.10.  As a conservative investor, I would expect the price of XOM to experience difficulty in rising above the high of $71.30 set on December 14, 2009.
Anyone still interested in the purchase of XOM could consider waiting for the stock to fall back to the window that was created today or purchase the stock today with 50% of the intended investment funds with the intention of using the second half when, and if, the stock comes back to the $64.43.  Personally, I hate to purchase a stock that has moved up so much in one day or chasing a rising price.  However, the fact that XOM is 6.89% above the 52-week low, has a Coppock Curve with a potential buy signal, has a consistent history of dividend increase with an eminent ex-dividend date warrants reconsideration of this stock despite the prospects of a secular bear market.  -Touc.    

One response to “ExxonMobil (XOM) Technical Update

  1. Maximiliano

    I like your analysis. I have bought XOM at 65.69. I have some analysis of XOM in addition to the good fundamentals:

    http://sailingmarkets.blogspot.com/search/label/XOM