The Symmetrical Triangle in Exxon Mobil XOM

Sep 21, 2009: 1:35 PM CST

I mentioned earlier this morning that an “Ascending Triangle” was forming in Crude Oil prices (daily), but there’s been an even larger triangle forming on the price charts of Exxon-Mobil (XOM).  Let’s take a look at the weekly and daily structure.

We can draw loose trendlines starting with the 2008 highs of $92.50 and then off the October 2008 lows to form a consolidating triangle (symmetrical) as shown above.

Price is now coming close to the “apex” or convergence price (roughly $69/$70) of the triangle, which often produces a price breakout move one way or the other (according to the Price Expansion/Contraction Principle).

For now, the upper boundary is $70 (though I’d stretch it to $72.50 to account for the numerous moving averages and Bollinger Band boundaries/resistance overhead – price would need to clear all of those before one should be bullish) and the lower boundary is $67.

It would appear – looking at this – that the odds may seem to favor a downward break over an upward break, just looking at the EMA structure and current trend structure.

Let’s dip down to the Daily chart:

This is an internal or terminal triangle that takes into account the most recent price consolidation (converging trendlines as shown).

Again, we would need a break above $71 to get bullish or a break beneath $68/$69 to get bearish.  The momentum oscillator is also contracting in anticipation of a breakout.

Should Crude Oil prices fall from here (triangle break to the downside beneath $70 per barrel), then Exxon-Mobil (and other oil-related stocks) would almost certainly break to the downside as well (and vice versa).

For now, let’s keep watching these triangles in anticipation of a trend/impulse/momentum move that would emerge when these boundaries are broken.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

15 Comments

15 Responses to “The Symmetrical Triangle in Exxon Mobil XOM”

  1. Bob Says:

    How would you feel about doing a straddle here?

    Buying both calls and puts – Nov. 21 09 $70.00 for a net debit of $5.57.

    A price projection would estimate a breakout move of $9-10. In your opinion, would a move of that size warrant taking such a position?

  2. Corey Rosenbloom, CMT Says:

    Hey Bob!

    I don't trade options much anymore, so I can't get into the specifics of that type of trade, but as you noted, you would need price to move over $5.50 to give you a profit in that position if held to close.

    If we look at the internal triangle, the price projection move (height) is roughly $10 ($74 – $64) which added or subtracted to the breakout point would take us roughly to $80 or $60.

    This is assuming price will break and follow the classic projection of the triangle (formula as shown above).

    I can't give specific advice, but do some more research on this position. It's definitely worth a look.

  3. Bob Says:

    A couple additional thoughts…

    An alternate strategy involving less capital might be a “strangle” with a put strike at $65 and a call strike at $75. This would require only a fraction of the capital to put the position on.

    With respect to XOM, this symmetric triangle looks a bit funky. Within triangles, a clean five wave pattern often plays out before price exists. In XOM, the Elliot wave count appears to have extended well beyond five waves (This consolidative pattern appears to extend back to October of 2008; where one starts a wave count; their are also some near touches to the trend lines that one might consider completed waves). To me, this wave count is confounding and the extending oscillations don't conform.

  4. Dan de Man Says:

    Looks like we broke out of our triangle today. Maybe a good time to short energy stocks.

  5. Corey Rosenbloom, CMT Says:

    What a day, wasn't it?!

    I'll try to squeeze in a follow-up post. There's so much I want to write about this evening (gold, crude, dollar intraday along with the SPY intraday moves) but no time to do it all.

    Opportunities abound – that's for sure.

  6. Dan de Man Says:

    Yah that was a pretty crazy day Corey! Keep up the great work on your blog.

    Thanks,
    Dan

  7. terlyn Says:

    Nice call, Corey!

  8. terlyn Says:

    Nice call, Corey!

  9. Update on that Pesky Triangle in XOM | Afraid to Trade.com Blog Says:

    […] last posted on Exxon-Mobil’s triangle on September 21st (reference that post for a larger perspective and more detailed analysis).  Price still continues […]

  10. Update on that Pesky Triangle in XOM | Penny Stock Trading System Blog Says:

    […] last posted on Exxon-Mobil’s triangle on September 21st (reference that post for a larger perspective and more detailed analysis).  Price still continues […]

  11. The Weekly Triangle in McDonalds MCD | Afraid to Trade.com Blog Says:

    […] mentioned the Exxon-Mobil (XOM) triangle in two previous posts (September 21st post and also September […]

  12. The Weekly Triangle in McDonalds MCD | Penny Stock Trading System Blog Says:

    […] mentioned the Exxon-Mobil (XOM) triangle in two previous posts (September 21st post and also September […]

  13. An October 15 Update on the Exxon Mobil XOM Triangle | Afraid to Trade.com Blog Says:

    […] triangle consolidation pattern in Exxon-Mobil for some time now, including the post “Symmetrical Triangle in XOM” and “Update on the Triangle in XOM“.  Now that we have a change in the triangle […]

  14. An October 15 Update on the Exxon Mobil XOM Triangle | Penny Stock Trading System Blog Says:

    […] triangle consolidation pattern in Exxon-Mobil for some time now, including the post “Symmetrical Triangle in XOM” and “Update on the Triangle in XOM“.  Now that we have a change in the triangle […]

  15. Update on Exxon Mobil XOM Support Break Jan 28 | Penny Stock Trading System Blog Says:

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