Update on that Pesky Triangle in XOM

Sep 30, 2009: 2:42 PM CST

Exxon-Mobil (XOM) still remains within a triangle consolidation pattern that has lasted at least since 2009 started, and now we’re seeing an even tighter triangle within the larger triangle.  When will it ever end!?  Soon, perhaps  Let’s take a look at the current XOM Daily Chart.

I last posted on Exxon-Mobil’s triangle on September 21st (reference that post for a larger perspective and more detailed analysis).  Price still continues to contract in the “Value Area” of the $69 region.

The boundaries have now contracted so we need to be watching the $67.50 and $70.50 prices for signs of a potential breakout one way or the other.

Conservative traders may even want to wait for a close above $71 or beneath $67 before trying to take a position – aggressive traders might want to look sooner than that.

I generally don’t like to get positioned inside a triangle, but to take advantage of the “expansion” move that often comes from the breaking of such obvious trendlines (and the “positive feedback” that can occur).

This also reminds me of the lesson that price patterns will sometimes absolutely bore you to tears so that you start ignoring a stock and looking for other opportunities.  When you finally remember “Oh, yeah.  I wonder what XOM is doing,” you check it only to notice that it has already broken out as expected without you on board.

Options traders sometimes beat stock traders because of this tendency – as they’ll put on spreads or straddles to take advantage of volatility expansion one way or the other, which stock traders are tasked with getting direction correct and are subject to whipsaws sometimes.

If you’re by any means adept at trading range volatility expansion plays, I suggest you take a look further at Exxon-Mobil for a possible breakout expansion play.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

28 Comments

28 Responses to “Update on that Pesky Triangle in XOM”

  1. geoff983 Says:

    Isn't it obvious that this stock is going to break to the upside?

    Cool pattern though – Its not often that you see a clear consolidation like that over those time periods.

  2. Corey Rosenbloom, CMT Says:

    Haha.

    It even goes back further to the weekly frame as well – I can't recall seeing such a 'perfect' triangle. I'm so anxious to see how it's going to play out.

    I'd cast my bet for a downside break, but again, anything can happen in a triangle and it's the positive feedback that creates the range expansion that you want to play – not trying to be a hero and call direction.

  3. geoff983 Says:

    I agree with you that its interesting …. but I don't know how the price will move. Our bets are in the opposite direction but we shouldn't underestimate what a fight has played out to get us to this crucial point! And I agree – remove the opinion and play the inevitable 'expansion' when it occurs.

    I really appreciate the different ways of looking at the market that you articulate so well to those avid readers out there. As a token (possible) bonus I have my own view of play that should be considered, Desire Petroleum plc (Public, LON:DES). It is speculative but the risk reward is immense and more importantly the downside loss is minimal due to the proven natural gas deposits which are worth 7 times the current valuation of the company.

  4. Tarique Says:

    I am sure others also must have noticed, but i generally see that the younger trendline in triangles prove to be stronger and hence here we can expect to see an upside breakout. Very clean and instructive pattern though. One request from me.. can you look at India's Reliance Industries Charts, which is also a Refinery stock and carry 12% weightage on Nifty

  5. Bob Says:

    I'll pile into the speculation on direction… I would lean towards a downward move. My reasoning is higher oil prices would have a negative effect on the global economy. Those in government who are trying to stimulate and expand the economy will want oil to remain low for as long as possible. Low oil prices will have a profoundly favorable effect. A spike in oil would be very negative at this moment in time.

    Bob

  6. Bob Says:

    It's 11:30 AM EST and price is right at the bottom bound. Will the trend line break?

  7. terlyn Says:

    Bottomed as of at 67.42 at 11:25

  8. Dan de Man Says:

    You may get more bang for your buck shorting gas stocks.

  9. Corey Rosenbloom, CMT Says:

    Hey Tarique,

    That's a big weighting! Do you have a symbol for the stock? I'll see if StockCharts.com plots it.

  10. Corey Rosenbloom, CMT Says:

    I'm with you on that – higher oil would hurt an economic recovery, but oil prices are likely to rise because of any recovery – it's going to be very hard to keep crude low if the economy continues to recover.

    Something's gotta give, though.

  11. Corey Rosenbloom, CMT Says:

    Precisely – there are always ways to enhance returns from these patterns – leveraged ETFs, futures, options, volatile stocks related to XOM.

    I try to track the 'standards' – which are less volatile – but are leaders, so other stocks tend to follow.

  12. Corey Rosenbloom, CMT Says:

    This is thrilling to watch!

  13. tarique18 Says:

    Hey Corey, I am not sure if StockCharts plot it, but you can use “RELIANCE” in http://www.icharts.in

  14. Bob Says:

    I'm thinking the central governments are targeting a trading range for oil between $50 and $75. The longer they can extend its hanging out in this zone the better. This range is good for economic recovery while being high enough to give the oil producing nations reasonable revenues.

  15. Bob Says:

    It's 11:30 AM EST and price is right at the bottom bound. Will the trend line break?

  16. terlyn Says:

    Bottomed at 67.42 as of 11:25.

  17. Dan de Man Says:

    You may get more bang for your buck shorting gas stocks.

  18. Corey Rosenbloom, CMT Says:

    Hey Tarique,

    That's a big weighting! Do you have a symbol for the stock? I'll see if StockCharts.com plots it.

  19. Corey Rosenbloom, CMT Says:

    I'm with you on that – higher oil would hurt an economic recovery, but oil prices are likely to rise because of any recovery – it's going to be very hard to keep crude low if the economy continues to recover.

    Something's gotta give, though.

  20. Corey Rosenbloom, CMT Says:

    Precisely – there are always ways to enhance returns from these patterns – leveraged ETFs, futures, options, volatile stocks related to XOM.

    I try to track the 'standards' – which are less volatile – but are leaders, so other stocks tend to follow.

  21. Corey Rosenbloom, CMT Says:

    This is thrilling to watch!

  22. tarique18 Says:

    Hey Corey, I am not sure if StockCharts plot it, but you can use “RELIANCE” in http://www.icharts.in

  23. Bob Says:

    I'm thinking the central governments are targeting a trading range for oil between $50 and $75. The longer they can extend its hanging out in this zone the better. This range is good for economic recovery while being high enough to give the oil producing nations reasonable revenues.

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