Exxon-Mobil is teetering at a critical support zone that buyers must hold… or else a monthly downside target could come into play.  Price is currently in an ascending trading range with clear support and resistance levels.  Let’s take a look at the weekly and monthly chart of Exxon-Mobil (XOM) to see these critical levels to watch.

Taking a look at the weekly chart, we see dual trendlines starting from the 2008 price highs and lows until present day.  These trendlines intersect at the $67 per share level, which is a critically important support zone.

For now, the lower trendline rests just above $67.50, which is exactly where price ended 2009.  We begin 2010 afresh with an absolutely critical price test of this all-important price support level.

Why do I define $65.00 as absolutely essential support?  That’s because any move under the $65 level could start an avalanche downside move that brings into play a long-term, monthly chart target… an ominous monthly-scale bear flag.

XOM Monthly Reveals Potential Bear Flag:

Bulls are praying that this chart does not become reality, but the pattern is clear if we get a downside break.

The trendlines as seen on the weekly chart seem to form the ‘flag’ portion of a Bear Flag price pattern on the monthly chart.

Under classic technical analysis, we take the measure of the impulse (the move from $90 down to the $55 level – a $35 difference) and then subtract this to get an aggressive price target from the lower trendline which currently rests just above $65.  Subtracting $35 from $65 gives us a final price projection target of $30 per share.

I prefer to be more conservative in setting targets from bear flags, which means I would subtract the $35 impulse from the upper of the flag, which currently rests above $75.  Thus, I would derive a target of $75 minus $35 or $40 per share.

Either way, the monthly bear flag, if it becomes reality, does not bode well for Exxon-Mobil, oil prices in general, or the broader stock market.

Keep in mind that this is one of many ways to interpret the chart of Exxon-Mobil, but it is a possibility that needs to be monitored closely for signs of follow-through.

For my prior analysis posts on Exxon-Mobil, see the following:

August 10, 2009: Triangle Trendline Lesson in Exxon-Mobil

September 21, 2009:  Symmetrical Triangle Forms in Exxon-Mobil

September 30, 2009:  An Update on that Pesky Triangle in Exxon-Mobil

October 15, 2009:   Update on the Triangle in Exxon-Mobil

Corey Rosenbloom
Afraid to Trade.com

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