Exxon Mobil Looks Vulnerable

 | Apr 18, 2017 | 2:08 PM EDT
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Exxon Mobil  (XOM) has made a lopsided double-top formation. For the past three months, XOM has been trading below its September/November lows, suggesting that the path of least resistance may be lower in the weeks ahead.

Let's check the charts and indicators to see what the risks are for the next few weeks.

In this daily chart of XOM, above, we can see how prices made a lower high in December versus the earlier high in July. Prices were above the 50-day and 200-day moving averages in April through July. From August to December, the price of XOM crossed below and above these averages. From January, XOM has been weaker and has traded below the declining 50-day and 200-day moving averages. The On-Balance-Volume (OBV) line has moved up and down with the price action, but overall it has gently trended lower the past 12 months. A lower trending OBV line indicates that sellers of XOM have been more aggressive.

In the lower panel is the 12-day momentum study, which from January to March shows higher lows versus lower lows in price. This is bullish divergence and tells us the decline in price has slowed. Maybe this bullish divergence resulted in the bounce in prices earlier this month?

In this weekly chart of XOM, above, we can see prices have been below the declining 40-week moving average line for the past four months. The weekly OBV line peaked in June 2016. The weekly Moving Average Convergence Divergence (MACD) oscillator is below the zero line, but the two lines that make up the indicator have narrowed toward a possible crossover and cover-shorts buy signal.

In this Point and Figure chart, above, we can see how the $81 level has held. A trade at $80 will be bearish and open up the possibility of deeper decline with a target as low as $70.

Bottom line: A close below $80.50 is likely to precipitate further declines while a close back above $84 will strengthen the chart picture.

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