Top Trade Ideas For The Week: XOM
Dragonfly Capital | Aug 01, 2016 07:52AM ET
Here is your Bonus Idea with links to the full Top Ten:
ExxonMobil (NYSE:XOM), stock went through a long downturn with falling oil prices but found a bottom in January. Since then it has moved higher is a rising channel. After a 30% move higher in just under 5 months it broke that channel to the down side Wednesday and followed through when it reported earnings Friday.
The 200 day SMA stands below at about $84. The stock has not been in contact with that since the Golden Cross printed February 24th. Momentum indicators support more downside in the stock but are also starting to show oversold.
The RSI has fallen to 30 and making a nearly 8 month low. The MACD crossed down in the middle of the month and just turned negative. The stock price fell out of the Bollinger Bands® Friday which have opened to the downside.
Friday saw a touch at a 38.2% retracement of the leg higher and strong buying all day after the gap down. The Hammer candle is a case for support and a reversal. Below there is possible support at the prior lows at 87.50 and then at 85 before 82.
On a reversal higher there may be resistance at 90 and 92 before 93.75 and 95.50. Short interest is just over 1% in this stock, so not a factor. The stock will trade ex-dividend starting August 10th.
The weekly options chain shows large open interest at the 88 and 89 Puts and smaller size at the 90 Put and 90.5 Calls. Note, almost all open interest this week is above. August monthly options see very large open interest at the 85 Put Strike and then even higher at the 92.5 Strike above.
On the Call side it is biggest at 90, 92.5 and 95, but all smaller than the Put volume. September and October options show an upward bias.
ExxonMobil, Ticker: XOM
Trade Idea 1: Buy the stock on a move over 89 with a stop at 86.50.
Trade Idea 2: Buy the stock on a move over 89 and add a August 88.5/85 Put Spread ($1.10) while selling a September 2 Expiry 90 Covered Call (85 cents), just 35 cents for the collar protection.
Trade Idea 3: Buy the August 5 Weekly 88/August 90 bullish Risk Reversal for 14 cents.
Trade Idea 4: Buy the August/October 90 Call Calendar for $1.43.
Trade Idea 5: Buy the August/October 90 Call Calendar and sell the August/October 85 Put Calendar for $21 cents.
Trade 1 is a straight stock buy for a reversal while Trade 2 adds a collar for short term protection to 85 for a small fee. Trade 3 is a leveraged short term trade for a reversal higher. Trade 4 is a longer term trade for upside looking for 90 to stall it in the short term, and Trade 5 adds short term downside protection/participation with leverage.
Get The News You Want
After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which heading into August sees the Equity markets still look strong but the smaller cap and technology laden indexes stronger than the large caps.
Elsewhere look for Gold to continue its uptrend while Crude Oil continues lower. The US Dollar Index looks better to the downside short term while US Treasuries are biased higher. The Shanghai Composite looks like it will continue to drift lower while Emerging Markets move higher.
Volatility looks to remain at abnormally low levels keeping the bias higher for the equity index ETF’s SPDR S&P 500 (NYSE:SPY), iShares Russell 2000 (NYSE:IWM) and PowerShares QQQ Trust Series 1 (NASDAQ:QQQ).
Their charts show real strength in the QQQ with the IWM ready to join it moving higher, while the SPY takes a pause. Use this information as you prepare for the coming week and trad’em well.
DISCLAIMER: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
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