The West Texas Intermediate (WTI) crude oil contract is trading near $40, after the completion of 80 point of travel off of April of the historical decline to$40.32. Energy Stocks have rebounded since this time, but the energy giant and Dow component Chevron Corporation (CVX) and Exxon Mobil (XOM) are still well below the levels recorded in January and February, bringing the recovery effort in doubt. Similarly, the bottom fishing continues at a modest pace, while the armchair technicians wonder if it is time to take the plunge.
These behemoths to cope with more difficulties than the smaller exploration and production companies because the gasoline sales are highly cyclical, rising during periods of economic growth and contracting during periods of economic recession and recessions. UNITED states the level of activity remains well below 2019 peaks despite the reopening of efforts, raising fears that the economy will fall back into recession, especially with an out-of-control epidemic that is ravaging the South and the south-western states.
Political headwinds are also taking a bite out of purchasing power, with the sovereign and hedge funds under pressure from environmental groups to dump energy portfolios. The anger of calls is expected to grow stronger over time, but supply and demand will determine their ultimate fate, with a strong demand to overcome the policy for the vast majority of investors. However, we have not yet reached this point yet, given the excess supply that still has not been absorbed, despite an improvement in the outlook for activity.
Chevron stock has attracted the most interest from buyers than its rival, since the month of March, but long-term the downtrend remains intact. Looking back, the stock has posted a series of nominal new highs, between 2011 and 2014 before the trim just above $135. It is sold with the global markets, in 2015, fell in the five-year low in the upper part of $60, before multi-legged hike that has stalled less than two points below the 2015 high in January 2018.
The stock then began a slight decline, posting a long series of lower highs in January 2020, when the fund has dropped to 53% of the decline to the lowest since 2005. The second quarter rebound reversed at the .618 sale of retracement from the beginning of June, dropping by through new resistance at the 200 month exponential moving average (EMA) and .50 sale retracement in the low – $90. This barrier has the potential to limit the upside well into 2021.
The monthly stochastic oscillator entered the oversold zone in March, and crossed to buy a cycle, which is now gathering momentum. This investment should support a rebound in the 200-month EMA, which is not likely to move on a second attempt. However, more important than-expected purchasing power would negate bearish, supporting further upside in the 50-month EMA resistance to the down to $110.
Exxon Mobil stock topped out in the mid – $90 in 2007 and sold in the mid-$50 in 2008 during the economic crisis. A support 2010 test completed a double bottom reversal, which gives a constant increase that has reached the state of the high in the summer of 2013. A December breakout made little progress, with around $105 in 2014. The subsequent downtick found support in the $60, which gives a rebound that has carved the first of a long series of lower highs in 2016.
The downward trend tested the 2015 low with success in December 2018, will generate another lower high in April 2019. The stock then ticked lower in a slow drip, to break this support level on heavy volume in February 2020. The sale is completed just 51 cents above the low of 2002, a few weeks later, which gives a rebound that has failed to reach the .382 Fibonacci sale retracement or long-term moving averages.
Exxon Mobil has also crossed the monthly stochastic to buy the cycle, but the bull signal has not exercised much influence on the second quarter of the price action, and the stock is on the point of finishing the month with a bearish doji gravestone, which predicts even lower prices. Exxon could easily reach and break the March low with this model, raising doubts that its rival will continue to tick higher, because the two stocks trade in tandem.
The Bottom Line
Big Dow energy giants to continue the fight despite the 80 points of crude oil, rebound and be able to easily test the first-quarter low.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.