Oil stocks rebound in support as bargain hunters collapse
Energy stocks gained ground on Wednesday, July 21, following the rise in oil prices as bargain hunters pushed up volatile commodity prices after a one-month sell-off. Crude futures fell as much as 7% earlier this week amid a global spike in the more infectious variant Delta COVID-19 and news that the Organization of the Petroleum Exporting Countries (OPEC ) has reached an agreement to increase production in the coming months.
However, the commodity closed New York trade on Wednesday up 4.2% at $ 72.23 a barrel as improving risk appetite offset data showing an unexpected increase in crude inventories. over the past week, indicating that traders may have incorporated the continuing imbalances of supply and demand into prices.
Key points to remember
- Oil prices rebounded 4.2% on Wednesday as bargain hunters bid on the commodity.
- Look for further gains on Exxon Mobil after the stock finds support at $ 55.50.
- The Energy Select Sector SPDR fund may retest its 2020 high after buyers defended the support level of $ 46.50.
Below, we take a closer look at the biggest energy value in the S&P 500 Index – Exxon Mobil Corporation (XOM) – and the industry’s flagship exchange-traded fund (ETF) – the Energy Select Sector SPDR Fund (XLE). . We will also look to charts to identify possible tactical trading games using technical analysis.
Exxon Mobil Corporation (XOM)
With a market capitalization exceeding $ 240 billion, Exxon Mobil ranks as the world’s largest exploration and production company. The Irving, Texas-based energy giant produces 2.3 million barrels of liquids and 8.5 billion cubic feet of natural gas per day. It also has a global refining capacity of 4.8 million barrels of oil per day. As of July 22, 2021, Exxon is offering an attractive dividend yield of 6.07%, but has fallen almost 8% in the past month. However, since the start of the year (YTD), the stock has gained 40.13%.
Exxon shares have remained in a strong downtrend since reaching their 2021 high at the end of last month. In better news for the bulls, buyers moved back into the stock at $ 55.50, where price finds key support from a multi-month horizontal trendline. Gains continued to accelerate during Wednesday’s trading session, and the stock could see a further rise in the near term. Those entering these levels should consider making a profit on a retest of the current year high of $ 64.93 while protecting capital with a stop-loss order placed below Monday’s low or Tuesday, depending on personal risk tolerance.
A horizontal line is often drawn on a price chart to highlight areas of support or resistance. In geometric analysis, a horizontal line runs parallel to the x-axis. In other words, on a perfectly horizontal line, all the values will have the same y value.
SPDR Energy Select Sector Fund (XLE)
Like XOM, the energy sector fund’s share price declined over the past month before leveling off this week. Buyers stepped in to defend the $ 46.50 level, where price has found significant support since the April low. Active traders going long in this area should consider placing a take profit order near the key resistance at $ 56.50 and limiting the downside risk with a stop loss order somewhere below the low of. this week at $ 46.30.
Launched in 1998, the Energy Select Sector SPDR fund seeks to provide a return similar to that of the Energy Select Sector Index, a benchmark weighted according to market capitalization comprising the US energy companies included in the S&P 500. The weights sector heavyweight Exxon Mobil and Chevron Corporation (CVX) carry the largest weightings in the fund’s portfolio, with respective allocations of 23.55% and 20.46%. Other well-known companies in the ETF’s 23-stock basket include ConocoPhillips (COP), EOG Resources, Inc. (EOG) and Schlumberger Limited (SLB). A daily turnover of nearly 30 million shares on an average spread of 0.02% on average helps to minimize trading costs. XLE controls $ 25.6 billion in net assets, offers a 3.92% dividend yield, and trades 29.95% higher for the year as of July 22, 2021.
A swing down is created when a lower is lower than any other surrounding price in a given period of time.
Disclosure: The author did not hold any position in the above titles at the time of publication.