Can Exxon Mobil Break Out?

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With shares of Exxon Mobil (NYSE:XOM) trading around $91, is XOM an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Exxon Mobil is a manufacturer and marketer of commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and a range of specialty products. The company has a number of divisions and affiliates with names that include ExxonMobil, Exxon, Esso or Mobil that operate or market products in the United States and other countries of the world. Exxon Mobil’s principal business is energy, involving exploration for and production of crude oil and natural gas; manufacture of petroleum products; and transportation and sale of crude oil, natural gas, and petroleum products. Energy is essential to global growth and day-to-day operations of companies and consumers worldwide. So long as crude oil is a main source of energy, a bellwether like Exxon Mobil will continue to see rising profits well into the future.

T = Technicals on the Stock Chart are Strong

Exxon Mobil stock has moved significantly higher in recent years and has run up to a long-term resistance level. Should the stock make a solid break above this key resistance level, higher prices will undoubtedly be ahead. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Exxon Mobil is trading above its tangled key averages which signal neutral to bullish price action in the near-term.

XOM

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(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Exxon Mobil options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Exxon Mobil Options

17.53%

43%

40%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

June Options

Average

Average

July Options

Average

Average

As of today, there is an average demand from call and put buyers or sellers, neutral over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Exxon Mobil’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Exxon Mobil look like, and more importantly, how did the markets like these numbers?

2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

6%

11.33%

-1.88%

56.42%

Revenue Growth (Y-O-Y)

-12.29%

-5.29%

-7.68%

1.5%

Earnings Reaction

-1.52%

0.07%

0.47%

1.5%

Exxon Mobil has seen increasing earnings and decreasing revenue figures over most of the last four quarters. From these figures, the markets have been indifferent about Exxon Mobil’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has Exxon Mobil stock done relative to its peers, BP (NYSE:BP), Chevron (NYSE:CVX), Royal Dutch Shell (NYSE:RDS), and sector?

Exxon Mobil

BP

Chevron

Royal Dutch Shell

Sector

Year-to-Date Return

5.22%

3.17%

14.09%

-1.62%

4.15%

Exxon Mobil has been a relative average performer, year-to-date.

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Conclusion

Exxon Mobil provides essential energy products and services to a multitude of companies and consumers located around the world. The stock has moved higher over the last several years and is now bumping up against a long-term resistance price level. Earnings have risen while revenue has declined over most of the last four quarters which has not produced any significant reactions by investors. Relative to its peers and sector, Exxon Mobil has been a year-to-date average performer. WAIT AND SEE what Exxon Mobil does this coming quarter.

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