Exxon Mobil Washing Out Today - Could A Bounce Be In The Cards?
Exxon Mobil Corporation (NYSE: XOM) gapped down on the post-OPEC / nasty crude oil drop hangover Friday morning.
Even though Exxon Mobil shares have held up nicely during the recent decline in crude, not even Exxon could withstand the barrage of selling pressure generated by Thursday and Friday's drop in crude oil.
Some technicians believe a very short-term low in crude was put in Thursday and that a counter-trend bounce has either started or will start shortly.
Technicians note that such a bounce may take crude up to $75 - $80 from the current $69 level. From there, however, they are calling for a downside move that should create even lower lows for crude oil.
That being noted, investors and traders should likely be looking for a bounce in Exxon Mobil that will coincide with crude's bounce and then a nasty fall that will tag along with the anticipated secondary decline in crude.
Let's take a look at the whole Exxon Mobil picture, though, to all bases are covered…
What the bulls see in Exxon Mobil:
- Reasonable valuation metrics
- An enterprise value of $417 billion that slightly trumps the market capitalization of $388 billion
- A price-to-book ratio of 2.22
- A price-to-sales ratio of 1.02
- Net profit margins of 8.73 percent that spin off over $12 billion in positive levered free cash flow annually
- An impressive debt-to-equity ratio of only 11.65 percent
- A Treasury beating dividend yield of 2.90 percent with a low payout ratio of only 33 percent - giving Exxon room to raise its dividend
What the bears see in Exxon Mobil:
- An expensive P/E of just over 15 when considering the 2015 estimates for negative revenue and earnings growth
- A technical outlook for crude oil by some analysts that have prices continuing to tumble to the low-$60s
The technical take on Exxon Mobil shares:
Technicians note that Exxon shares may be in the midst of a macro head & shoulders topping formation. The resistance for the right shoulder of this formation comes in at around $97.50 - $98.50 and the downside target – should the formation play out completely – would be down at $70.
Short-term support for Exxon Mobil comes in at Friday's low of $90.58 and is backed up by the October lows around $87. The technical call is for a continued bounce in both crude oil and Exxon in the very short-term.
Once upside resistance is met – at $97.50 for Exxon Mobil and $75.91 for crude oil – sellers will come back into the mix with vigor.
Exxon Mobil shares could rally off of Friday's lows – right along with crude oil. Nimble traders can play the long side in anticipation of that rally continuing up to the projected “right shoulder” resistance.
Stops must be honored by the longs, however, on any undercut of Friday's lows. Short-sellers will likely be looking to re-enter the Exxon Mobil arena if and when the $97.50 level is tested.
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