Chevron, Exxon Mobil Report as Crude Oil Slumps

Nymex crude oil futures set a 2018 high of $76.90 on Oct. 3, correlating well to the performance of Chevron Corporation (CVX) and Exxon Mobil Corporation (XOM), although shares of the energy giants set their 2018 highs of $133.88 and $89.30, respectively, in January.

Chevron and Exxon Mobil are components of the Dow Jones Industrial Average and are two of the "Dogs of the Dow" for 2018. Chevron stock traded as high as $127.60 on Oct. 10 and then plunged 15.7% to its 2018 low of $107.54 on Oct. 29. Exxon Mobil shares traded as high as $87.36 on Sept. 25 and then slumped 12.7% to $76.22 on Oct. 29. The decline in crude oil from $76.90 on Oct. 3 to $64.65 this morning totaled 15.9%.

Chevron and Exxon Mobil are due to report third quarter earnings before the opening bell on Friday, Nov. 2. Analysts expect Chevron to post earnings per share of $2.06, while Exxon Mobil is slated to disclose earnings per share between $1.21 and $1.25. The price of crude oil is a factor, and oil rallied during the third quarter. Better-than-expected earnings could be in play for the oil giants, but forward guidance could be disappointing. Buyers of Chevron and Exxon Mobile stocks are likely attracted by their respective dividend yields of 4.12% and 4.24%.

Here's the weekly chart for crude oil futures

Weekly technical chart showing the performance of crude oil futures
Courtesy of MetaStock Xenith

The weekly chart for crude oil is negative, with oil prices below their five-week modified moving average of $68.97. Oil is above its 200-week simple moving average, or its "reversion to the mean," at $52.11. The 12 x 3 x 3 weekly slow stochastic reading is projected to fall to 43.77 this week, down from 54.23 on Oct. 26.

Given this chart and analysis, traders should consider buying oil on weakness to my annual value level of $63.81 and reducing holdings on strength to my quarterly and monthly risky levels of $73.87 and $75.58, respectively.

The weekly chart for Chevron

Weekly technical chart showing the performance of Chevron Corporation (CVX)
Courtesy of MetaStock Xenith

The weekly chart for Chevron is negative, with the stock below its five-week modified moving average of $117.05 and above its 200-week simple moving average of $106.62, which is the "reversion to the mean." The 12 x 3 x 3 weekly slow stochastic reading is projected to slide to 32.56 this week, down from 38.46 on Oct. 26.

Given this chart and analysis, traders should buy Chevron shares on weakness to the 200-week simple moving average of $106.62 and add to positions on weakness to my semiannual value level of $92.45. I recommend reducing holdings on strength to my monthly risky level of $117.11. My quarterly risky level is $132.00.

The weekly chart for Exxon Mobil

Weekly technical chart showing the performance of Exxon Mobil Corporation (XOM)
Courtesy of MetaStock Xenith

The weekly chart for Exxon Mobil is negative, with the stock below its five-week modified moving average of $81.19 and below its 200-week simple moving average of $82.89, which is the "reversion to the mean." The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week declining to 48.11, down from 57.04 on Oct. 26.

Given this chart and analysis, my trading strategy is to buy Exxon Mobile shares on weakness to my monthly and semiannual value levels of $73.54 and $69.86, respectively, and to reduce holdings on strength to my annual risky level of $103.71. My quarterly pivot is $78.50.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.

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