XOM Forms Another Daily Triangle Pattern

Sep 29, 2010: 1:25 PM CST

Exxon-Mobile’s (XOM) stock chart has a tendency to form triangle patterns – as I’ve pointed out in the past.

It looks like another symmetrical triangle price pattern has formed, with price slightly tipping above the upper boundary on lackluster volume and momentum – perhaps we’ll need to redraw the boundary.

Let’s take a look at the current pattern and key price levels to watch:

I discuss Triangle Patterns in the educational section on Triangles (Symmetrical, Ascending, and Descending).

Generally, triangles are just two price trendlines that converge at the apex, or cross-over point.  More times than not, price will break out of the triangle trendline boundaries before price reaches the apex (crossover).

It’s possible we’re seeing a breakout in XOM, but if so, we’re not seeing a corresponding breakout in volume or momentum – notice the 3/10 oscillator also shows a corresponding triangle pattern that has NOT broken out yet.

So if that’s the case, we’ll need to redraw the upper trendline, or just call this a potential “bull trap” or false breakout.

The currently drawn trendline rests at the $61.00 level, which also sports the 20 day EMA at $61.18.  Right now, that level will be the determinant – or key – to future price action.

It’s bullish if shares remain above $61, but otherwise a break back down under $61 sets up a short-term retest of $60, and a breakout under $60 would be a bearish turn-about.

Keep in mind that the 200 day SMA rests currently at the $63 area overhead, so a continuation breakout might have trouble rising above $63 in the short-term.

For now, watch $61 for support, $63 for resistance, and a breakdown under $60 as a bearish trigger.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

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