Exxon Mobil Corporation (NYSE: XOM) evolved over the years from a regional marketer of kerosene in the US to the biggest publicly traded petroleum and petrochemical company in the world. They operate in almost all countries and are best known for brand names such as Exxon, Esso, and Mobil.
It goes without saying that 2015 will be a year to remember for companies involved in the oil industry. Oil dropped more than 50% this year, and companies in the sector needed to reassess their business plans quickly.
Just so you understand the impact of a reassessment; we have to consider that all business plans were made for an oil price that would be stable at around $100. This means that investments, loans, research, and development, etc, need to be reconsidered since the price of oil dropped so dramatically. In this case, the bigger the company, the more likely it is to find enough resources to overcome a difficult period. As a rule of thumb, it is known that small players are the first to suffer when an economic situation gets difficult.
Oil prices got a boost from the ECB (European Central Bank), as the ECB’s President Mario Draghi signaled that more stimulus is on the cards.
We understand that stimulus means a central bank will buy more bonds than the current program does. The ECB said that a decision for this move should be made in December, and this was enough for markets to take it as gospel and equities, (including oil), rallied. More stimulus means more accommodative measures and global economies (not just the Eurozone), should find it easier to cope with these times.
From a technical analysis point of view on the bigger picture, the share price of XOM is looking rather bearish. It is forming a possible flat pattern. Such a pattern, while it is a corrective one, implies an impulsive move at the end, and it seems that we’re right in that impulsive move. It would appear only after the price reaches levels below the $57 that the pattern should be considered as completed. Therefore, staying short or looking for put options on any bounce is the thing to do until then.
The current prices of $72.86/share are alright for a small put option with a one-month expiration date, but I would buy a more aggressive put option on any move into the $75 or even $77 level. I would use the same one-month expiration date for the more aggressive trade also.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
