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Chart Of The Day: Will OPEC Production Cuts Drive Exxon Stock Higher?

By Pinchas Cohen/Investing.comStock MarketsOct 06, 2022 08:36AM ET
www.investing.com/analysis/chart-of-the-day-will-opec-production-cuts-drive-exxon-stock-higher-200630733
Chart Of The Day: Will OPEC Production Cuts Drive Exxon Stock Higher?
By Pinchas Cohen/Investing.com   |  Oct 06, 2022 08:36AM ET
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Oil and its producing companies have been jumping since Monday. First, expectations that OPEC would cut more than 1 million barrels per day from production, its sharpest output cut since the COVID pandemic, pushed prices up ahead of its meeting yesterday.

But then, when OPEC and its partners agreed to cut 2 million barrels per day from production at its meeting on Wednesday, the price rallied further. The news "disappointed" the White House. The Biden Administration released a statement that the Department of Energy will release an additional 10 million barrels from the Strategic Petroleum Reserve next month and that the President will continue to "direct SPR releases as appropriate to protect American consumers and promote energy security."

Meanwhile, the only oil major to be in a clear uptrend is Exxon Mobil (NYSE:XOM), which registered a new all-time high on June 8. Exxon shares surpassed their previous high from July 28, 2014. Rising oil prices and soaring fuel, gasoline, and diesel prices helped XOM breach the $100 mark.

Reversing my bullish persuasion, I turned bearish on oil on July 6 when WTI completed a bearish flag, implying a much larger bearish triangle.

If I am right about oil, it stands to reason that XOM will follow lower. Therefore, the oil major might be developing an H&S top with an upward-sloping neckline, with a powerful weekly shooting star for a head.

XOM Weekly
XOM Weekly

Conversely, if XOM breaks through its June all-time-high downtrend line, it will have blown out the reversal pattern, turning it into a bullish, continuation triangle pattern. Statistically, when a structure completes—of the reversing or continuing variety—it triggers a technical chain reaction of orders, forcing the price further in its direction.

Trading Strategies

Conservative traders should wait for a pattern completion, either an H&S top or a symmetrical triangle, with a minimum 3%, 3-day filter, to avoid a trap.

Moderate traders would short XOM if it produced a long red candle beneath its current downtrend line.

Aggressive traders could short the stock now, counting on the resistance of the downtrend line and the psychological round $100 number, noting the price reached a high of $99.99 on Wednesday and closed lower.

Trade Sample - Aggressive Short

  • Entry: $100
  • Stop-Loss $105
  • Risk: $5
  • Target: $85
  • Reward: $15
  • Risk-Reward Ratio: 1:3

Trade Sample - Moderate Short

  • Entry: $98 (After closing below $96)
  • Stop-Loss: $100
  • Risk: $2
  • Target: $88
  • Reward: $10
  • Risk-Reward Ratio: 1:5

Trade Sample - Aggressive Long

  • Entry: $100 (after closing above $102)
  • Stop-Loss: $98
  • Risk: $2
  • Target: $106
  • Reward: $6
  • Risk-Reward Ratio: 1:3

Trade Sample - Moderate Long

  • Entry: $99 (after bouncing off $98)
  • Stop-Loss: $97
  • Risk: $2
  • Target: $105
  • Reward: $6
  • Risk-Reward Ratio: 1:3

Disclaimer: The author has no positions in any securities mentioned in this article.

Chart Of The Day: Will OPEC Production Cuts Drive Exxon Stock Higher?
 

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Chart Of The Day: Will OPEC Production Cuts Drive Exxon Stock Higher?

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Comments (2)
EL LA
EL LA Oct 06, 2022 12:52PM ET
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I might not want to bet against XOM here. That was a very powerful island reversal off the 200dma at the end of September and early October. Yesterday, we saw a double top breakout as well. Granted, the weekly needs time to reverse any bearishness, but the daily has already reversed and now targets 132. I might add, if one removes the years of the pandemic swoon, this oil giant has barely even begun to make its gains as the economy continues to reopen in full.
Pinchas Cohen
Pinchas Cohen Oct 06, 2022 12:52PM ET
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Reopen in full? Perhaps you're unaware of continued inflation and tightening, almost certainly causing a recession.
EL LA
EL LA Oct 06, 2022 12:52PM ET
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Pinchas Cohen  I see stagflation until people insist on growth rather than soup lines. Oil and gas is a win either way. You gotta eat... and, you gotta stay warm.
Pinchas Cohen
Pinchas Cohen Oct 06, 2022 12:52PM ET
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EL LA  Yes, but a recession means slowing commerce and transportation, much bigger than staying warm. Look at my link on oil in the article.
EL LA
EL LA Oct 06, 2022 12:52PM ET
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Pinchas Cohen  I believe slow commerce and transportation has been baked in as things have been slow throughout the global pandemic and we have hardly recovered from cancelled flights, scant product on empty shelves, and clogged supply chains. BTW, are those three white soldiers on the XOM daily chart? :)
Pinchas Cohen
Pinchas Cohen Oct 06, 2022 12:52PM ET
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EL LA  Baked in? Based on what? Oil was $20 in 2020 and $33 after the 2008 crash. No, three white soldiers is a reversal, not a continuation, pattern.
Ashraful Islam
Ashraful Islam Oct 06, 2022 9:05AM ET
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paresh baria
paresh baria Oct 06, 2022 9:05AM ET
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bolo
 
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