Oil Stocks Fall ahead of Oil Prices

Jul 16, 2008: 2:18 PM CST

In classic nature, oil stocks led the recent oil price decline, further giving clues that oil prices were in for a correction of some sorts.  Let’s take a look at Exxon-Mobil (XOM) and Chevron Corp (CVX) and the recent price of Crude Oil

Exxon-Mobil (XOM):

XOM peaked at $95 per share (closing price) in early May with a negative momentum divergence before rolling over beneath its key support via its daily moving averages, finding resistance at these averages (forming a coil), and breaking down sharply in this week’s trading.

One would expect with the headlines so bullish on oil that this stock would be surging as well – not so.  In fact, rampant magazine articles often precede the end of speculative moves, not the beginning.  Exxon-Mobile price has declined considerably since their May peak, meaning odds are that lower oil prices may be yet to come.

Chevron Corp (CVX):

Chevron shows a very similar picture, only the $100 price high was met on high momentum.  Price still failed at its key moving averages and have rolled over strongly in July.

Next, let’s look at Crude Oil prices themselves and see how these stock prices may have given us clues about the underlying futures prices.

Crude Oil Prices:

This chart does not yet show today’s intraday or closing action, but price will touch the blue 50 period EMA when the chart is updated with the daily close.

There was a negative momentum divergence (not shown) headed into the new price highs, which could serve as an intermediate top should further pressure continue on crude oil prices.

Needless to say, lower crude oil prices will be a boon for stocks, which is what we’re seeing in today’s almost 2% gain in the US Stock Market indexes.

Let’s keep our eyes focused here to see what further clues we can learn from oil and the economy.

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