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Jim Hyerczyk

Jim Hyerczyk

Fundamental and technical analyst with 30 years experience.

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Exxon Mobil and the Oil Markets

The price action by Exxon Mobil (XOM) puts this stock on the radar this week. This market is significant because it is a major component of the S&P 500 Index as well as a strong indicator of future price action in crude oil.

When comparing the Exxon chart to the S&P 500 chart, one will notice the divergence between the two. Since reaching a top at $95.49 the week-ending July 26, Exxon has sold off sharply, reflecting the strong correlation to the price of crude oil.

Even with the broad-based S&P 500 market trading at an all-time high, Exxon has not been able to muster the slightest rally. This is because the market is too closely tied to the fundamentals of oil. Investors have decided that the stock is overvalued based on oil prices and this is the force putting the pressure on its price.

Since reaching a low at $86.39 the week-ending August 22, Exxon stock has stabilized, suggesting profit-taking or aggressive counter-trend buyers are propping it up for a possible retracement to the upside. A similar pattern can be seen on the weekly October crude oil chart. Prices have stabilized inside a major weekly retracement zone with the market reaching a low at $92.50 the week-ending August 22.

At this point in price and time on the charts, crude oil and Exxon on poised to play follow the leader. Since crude oil topped almost a month before Exxon topped, the chart pattern is suggesting that a rally in this market will spark a similar…

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