Exxon-Mobil (XOM) at Critical Support

01/05/2010 12:01 am EST

Focus: STOCKS

Corey Rosenbloom

Founder and President, Afraid to Trade

Exxon-Mobil (XOM) is teetering at a critical support zone that buyers must hold or else a monthly downside target could come into play. Price is currently in an ascending trading range with clear support and resistance levels. Let’s take a look at the weekly and monthly chart of Exxon-Mobil (XOM) to see these critical levels to watch.

 


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Taking a look at the weekly chart, we see dual trend lines starting from the 2008 price highs and lows until present day. 

These trend lines intersect at the $67 per share level, which is a critically important support zone.

For now, the lower trend line rests just above $67.50, which is exactly where price ended 2009. We begin 2010 afresh with an absolutely critical price test of this all-important price support level.

Why do I define $65.00 as absolutely essential support? That’s because any move under the $65 level could start an avalanche downside move that brings into play a long-term, monthly chart target—an ominous monthly scale bear flag.


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Bulls are praying that this chart does not become reality, but the pattern is clear if we get a downside break.

The trend lines, as seen on the weekly chart, seem to form the “flag” portion of a bear flag price pattern on the monthly chart.

Under classic technical analysis, we take the measure of the impulse (the move from $90 down to the $55 level; a $35 difference) and then subtract this to get an aggressive price target from the lower trend line, which currently rests just above $65. Subtracting $35 from $65 gives us a final price projection target of $30 per share.

I prefer to be more conservative in setting targets from bear flags, which means I would subtract the $35 impulse from the upper of the flag, which currently rests above $75. Thus, I would derive a target of $75 minus $35, or $40 per share.
Either way, the monthly bear flag, if it becomes reality, does not bode well for Exxon-Mobil, oil prices in general, or the broader stock market.

Keep in mind that this is one of many ways to interpret the chart of Exxon-Mobil, but it is a possibility that needs to be monitored closely for signs of follow through.

By Corey Rosenbloom of AfraidtoTrade.com

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