I have been actively buying and selling in the portfolio last week, and informing subscribers of new investment ideas has kept me away from the blog more than usual. But a chart I follow caught my attention this weekend and I think it could help investors determine the next move in the global oil price.
I keep waiting for the 3 year chart on Exxon Mobil (XOM-NYSE) to break out or break down. I have been following it since I started my blog earlier this year. I noticed that oil bad become the market’s favourite derivative on the overall market, and I think that continues today. At times, the market moves the global oil price; at other times oil moves the market. Their relationship changes, but investors are definitely linking them.
And if equities lead commodity pricing, then should be XOM one of the bellwether stocks that investors should follow. However, it has NOT benefited from the run up in the NYSE this year. In fact, it has been strangely silent on forecasting market direction or oil price direction for the last six months. But its 3 year chart tells me that is about to change.
I am not a specialist chart reader. But when long term wedges come to a head like this, it presages a big move one way or the other.
I see a couple bullish signs from this chart
- For the most part, the up moves had bigger volume than the down moves.
- This type of chart is called a wedge or pennant formation, which are normally “continuation” patterns – they are just pauses in the dominant trend. However, the longer a chart consolidates in its wedge or pennant, the more likely it is to be a trend reversal, and not a continuation. This Exxon chart has consolidated a long time, but is it long enough?
- The five year chart actually looks like a bullish declining wedge chart.
In my next article, I will give a portfolio update and what new subscribers can expect in the next full length Oil and Gas Investments Bulletin.