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PreMarket Prep Stock Of The Day: Exxon Mobil

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PreMarket Prep Stock Of The Day: Exxon Mobil

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

The primary reason the broad market has not collapsed as of yet this week is a monster rally in crude oil. Since many firms in the sector are teetering on bankruptcy, any incremental increase in the price of oil will increase the chances of many companies remaining solvent.

In addition, it will take pressure off banks with massive loans outstanding to these cash-deprived companies. Most likely, most of big boys will survive, and a top candidate is Exxon Mobil Corporation (NYSE: XOM), which is PreMarket Prep's stock of the day.

Oil's Prolonged Slide Ahead Of COVID-19 Crisis 

ExxonMobil made its all-time high in July 2014 ($104.76), and had lost 72% when it finally bottomed at $30.11 on March 23. It has managed to rebound with the broad market, but with not nearly the same velocity. 

Off the open Friday, it barely cleared Thursday's high of $41.98, peaking at $42.14 before rolling over. At that point, it was higher by $2.14 and was in the red by $1.88, when it found intraday support at $38.52 just after noon.

The stock was trading lower by 3.84% at $38.85 at the time of publication. 

Exxon Not As Strong As Crude On The Way Up

It is hard to directly compare the rally in crude oil and the one in Exxon shares, but it is worth noting.

From the trough ($19.27) to its peak earlier Friday ($28.56), oil rallied 48%.

In turn, Exxon rallied only 40% from its trough ($30.11) to its peak ($42.18). 

What's The Catalyst To Take Exxon Higher?

Just as the production cuts aided oil futures and issues in the sector this week, other countries joining in will be an added bonus. More Importantly, it is crucial that the Saudis and Russians abide to the proposed cuts, and that will be reflected in weekly inventory numbers. 

Exxon Moving Forward

If today's price action in Exxon Mobil is indicative of the future price action, then look out. 

The issue was in a strong downtrend before the COVID-19 crisis.

With an end to crisis nowhere in sight and the world economy grinding to a halt, world oil demand is following suit.  

Basic economics tells us that price is derived from supply and demand factors. Although there is a potential reduction in supply, where is the demand going to come from? 

Photo by WClarke via Wikimedia

 

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