Exxon Mobil Is a Risky Buy Right Now

Exxon Mobil is grinding to new lows, but that doesn't necessarily make it a buy. Here's the risky dip-buying setup now.
Author:
Publish date:

Exxon Mobil  (XOM) - Get Report remains under significant pressure as it barrels to new multi-year lows.

While the company beat on revenue expectations on Friday, earnings came up short of estimates. Chevron  (CVX) - Get Report, which also reported on Friday, has been under serious pressure as well, although both reports were overshadowed by the significant decline in the overall market on Friday.

But it’s not just Exxon and Chevron that are under pressure - the entire energy space is being sold right now.

Given how big Exxon is, a decline like this surely demands investors’ attention. It’s got the Real Money team paying attention too, as it designates Exon Mobil as their Stock of the Day candidate.

Let’s take a closer look at the charts.

Trading Exxon Stock

Weekly chart of Exxon Mobil stock.

Weekly chart of Exxon Mobil stock.

Exxon Mobil is clearly not for the faint of heart right now. The stock has spent the better part of five years trading between a range of $66 and $82, as investors buy the dips of this dividend titan and ride it back up to $80-plus.

Wash, rinse, repeat.

However, every once in awhile Exon cracks below that $66 range support level. In the fourth-quarter of 2018, market-wide turmoil sent Exxon shares tumbling lower, with the stock eventually bottoming near $62. That was the lowest point since late-2015 and early-2016, where Exxon stock hammered out a bottom in the $61 to $63 area.

The only time Exxon Mobil stock was lower came in the third quarter of 2015, where shares bottomed at $56.25. Remember, this is a dividend-adjusted chart. On an unadjusted chart, Exxon is hitting its lowest level since September 2010.

For those using the chart above, they don’t want to see this stock lose $60 on a weekly basis. Below puts that 2015 low at $56.25 on the table. Those with the risk tolerance may consider buying near current levels, provided they have the discipline to cut the stock loose in order to limit their losses.

For those wondering, yes, this akin to catching a falling knife. If support holds, bulls will look for a rally back above $62. If it fails, a drop into the $50s is likely on the way. 

For the risk-averse trader (using an unadjusted chart, unlike the one above), the $56 area would may be a better risk/reward point, provided Exxon falls that far. 

Let's make no mistake about it, though: Exxon Mobil is a risky but right now. Below $60 and traders should have little interest in being long. Back above $62 and XOM could gain momentum back up to the $65 to $66 area.