Exxon Engulfed

Exxon now has a bearish engulfing candle on its daily chart (click to enlarge):

Notice what happened after the last bearish engulfing pattern that it had on January 6th (blue arrows). Also notice the big jump in volume on Friday. That makes it even more bearish.

Exxon announced earnings on Friday morning, and they were received as “good”, yet we got this bearish result. I’m thinking that a large fund(s) was looking to exit Exxon and used the earnings report to engage in a bit of distribution. In fact, it looks like XOM has been under distribution for a while:

The stock was in an uptrend channel (blue lines), but the pattern has recently degraded into a descending triangle (red lines) after struggling to hold the lower blue line over the last two weeks.

The XLE also has a bearish engulfing candle on its daily chart.

Exxon is an important stock since it is so huge, and if it is beginning a sustained downtrend, that will not be good for the indicies.

Note: I don’t have a position in XOM, XLE, or any other oil stocks. But if I did, I would be short.

61 Responses to “Exxon Engulfed”

  1. JO says:

    Hey Matt, thanks for the heads up on XOM. I have been watching it casually for a while.

    What is your view of the possibility of the SP500 have a pennant/symmetrical triangle pattern on the larger chart ? It still looks like it is there, and I am getting this hunch we could see a break of 800 or so hard and fast to the downside over the next week which could start the drive to new lows. Only a break of 930-940 would question that if i am correct.

    Just looking for your thoughts on this pattern as it applies to the current juncture.
    JO

  2. admin says:

    JO,

    I gave my view on the triangle a couple of days ago:

    http://www.trivisonno.com/goodbye-triangle

    Matt

  3. JO says:

    Thanks Matt.
    JO

  4. junglegirl says:

    There is also a slanted upright H&S forming on the 60 min SPX starting around December 15 through the present. It would break around 790 (v. loosely eyeballing it) and project downward to the same levels as EWT (737 or lower). Taking out 790 would also likely convince bulls we were below the level of running the shorts’ stops. An important juncture, IMHO.

    I previously called a number of inverted H&S “pseudo H&S.” If you study these, you can see that they actually form as part of the normal course of EWs.

    To me, this market is ready to break, HARD. Any tiny bounce would be an opportunity to load more shorts. We are approaching crisis level again. Keep a close eye on the bond market.

  5. junglegirl says:

    Sorry, not running shorts’ stops, running shorts’ long-play stops (or longs’ stops).

  6. Randall says:

    Larry has to jubbed (jubiliant) over this topic and talk of XOM’s technical demise…

  7. admin says:

    junglegirl,

    Also, gold is approaching the banking-panic highs of March and July.

    Matt

  8. newbie says:

    We knew what you meant ;)

  9. K says:

    awwwwwwwwwww

    From CNBC: ‘Bad Bank’ Run By FDIC Possible By Next Week: Source
    The talks are said to have yielded agreement that the FDIC would run the bad bank, according to an source. … Thursday could be the announcement day.

    looks like my UYG position will get crushed lol.

  10. junglegirl says:

    newbie, thanks. I like people who know what I mean!

    Matt, yes, it is.

    Re 737 or lower, I vote “or lower.” Any wave 3, regardless of cycle, cannot be the shortest wave (which gets us to at least 737). Frequently they are the longest wave (or subwave). Thus, I will be looking for Fib extensions to take us down even further.

    And should there be a bond market dislocation…. oh my.

  11. dave says:

    K,

    do you think it’s possible that firms like Zecco with a “free trade” business model (Yerk is teaching me B school talk) might have “bad” executions to “pay” for the “free trades” ??? Yes, i know that it’s supposedly an advertising business model.

  12. newbie says:

    @ K, that’s good news. It could give us that bounce that JG was talking about. I doubt I will get it, but I want another shot at VIX 40, SPY $87. I added at $85 & $87 but not as much as I planned. I let that FIB talk of SPX 900+ weaken my resolve.

  13. newbie says:

    Dave, not to mention a poor trading platform etc. Also I think there is a limit on the # of free /month.

  14. newbie says:

    The limit is 25 free per month.
    On a more serious note: Q4 earnings were about what I expected.
    Q1 guidance, on the rare occasion when it is given, continues to be negative. Negative earnings will no longer be rare breed.

    It has been very hard to balance the need to ‘protect my capital from newbie mistakes’ with the need to capitalize on this hard downturn. Such is life…

  15. dave says:

    Newbie,

    but doubt that the “bad” executions stop after the limit is reached.

    At one time i was directed to a trading desk for big option orders (500, 1000 contracts) for a certain very big name firm where i verbally communicated to this trading desk. Whenever my trades were communicated to a particular person i was always getting ripped off for 1/8, 1/4 on orders.

    Furthermore, my orders were never “worked” (which is part of the appeal of a trading desk). My orders were always being done at the same block price – strange for 1000 contracts. When i complained about it & was switched to a different person my bad executions stopped. The original person was front running my orders for his own acct.

  16. newbie says:

    May not be popular, but the Harvard man has the right idea.Of course taking them from $3.5 to zero is nothing like from $55 to $3.5 :-o

    “They have to do a bad bank,” Harvard Economics Professor Ken Rogoff said. But “if that’s all they do then it’s idiotic.”

    Institutions like Citi [C 3.55 -0.35 (-8.97%) ] and Bank of America [BAC 6.58 -0.20 (-2.95%) ] will have to go, boards will have to be fired and equity stakeholders will be wiped out, Rogoff said.

    http://www.cnbc.com/id/28928650

  17. dave says:

    Newbie,

    we would be surprised by how many people are attracted by “free”, “cheap”, or “guaranteed”

  18. newbie says:

    Dave,
    I agree, it is an attractive scam as the suckers are small fry who not likely to know they are a victim of a parasite. Or have enough money scammed to bother with the issue.

  19. newbie says:

    On the local radio they used to run ads for a real estate investment group with guaranteed returns of 14%. They even pretended to have one person question the claim but they followed up with “they have never missed a payment” I don’t hear that add anymore. … Ha just Google them:

    Due to the extremely difficult financing environment and unprecedented declines in the real estate market, XXX Properties and YYY Group have suspended all sales and marketing activities. YYY group ran the ads!
    I changed the names to save Matt any potential grief, but if you Google the text I before the comma they still come up. ;)

  20. dave says:

    newbie,

    “parasite”s exactly – the world of finance has many hyenas & jackals who are only too willing to follow the cheetahs around

  21. dave says:

    newbie,

    Absolutely, i even warned a kid about such an investment. He took $14k of a new $15k student loan (he already owed > $125k in student loans) & “invested” it in a first trust deed backed by NV real estate in 4th Q 2007. After i warned him about it he was angry with me for questioning the integrity of such. There had already been stories of people losing life savings in first trust deed investments.

    I’m writing an article for friends about why people historically lose so much chasing “yield” instead of “growth”. Ever thus…..

  22. newbie says:

    Not to mention useless ‘broke ers’ who say ‘You were diversified but everything went down. Sorry, but you still owe me 1%”

  23. newbie says:

    Matt is going to tell us to get a room… er our own blog…

  24. dave says:

    JG,

    thought you said that there was too much govt intervention to prevent bonds from going down ?

  25. dave says:

    2008 showed us that “buy & hold” doesn’t work nor diversification; but timing did.

    However, we’re constantly being told to not try to time mkts.

    I always did.

  26. K says:

    newbie I hope we bounce a bit too. i always believed the buy the rumor sell the news method :P.

    well i bought the fib and will most likely sell the rumor if not Monday then Tuesday. but we are due for a day or 2 up at least looking at some fibs.

    http://www.stocktock.com/2009/01/31/a-converging-fibonnaci-confluence/

  27. newbie says:

    @ Dave, a collegue reminded me of the old saying “You can’t time the market.” He was surpised when I agreed. I reminded him of the old saying “If you say you can’t, then you can’t. If you say you can, then you can. Either way you are correct.”

  28. newbie says:

    @ K, I am not sure how I feel about FIB retracements over such short time periods. Anyone have thoughts on short time frames and FIBs?

    FWIW: Acknowledging I missed the boat at $87, I will add shorts at $84. I believe we are headed down, but I just can’t justify going more than 50% short (mostly Dec PUTS) at these levels given my newbie status. I may not score as big as I could have, but at this point my #1 priority is to live to fight another day in case I make a newbie error. There will be more over-bought conditions to score in the future. BTW, if you told me three months ago that I would ever be 50% short, especially with OOM PUTS, I would have thought one of us insane. ;) Now show me $87 -won’t happen- and I will go bigger :mrgreen:

  29. dave says:

    newbie,

    “@ K, I am not sure how I feel about FIB retracements over such short time periods”

    Let’s bet on which way a flea jumps.

  30. K says:

    The flea jumps up. then falls down. then jumps up again higher.

    now as for TBT another stock tock presentation lol
    http://www.stocktock.com/wp-content/uploads/2009/01/tbt2.png

  31. K says:

    by the way i have an account at covestor.com that tracks my performance. … of course it assumes i’m 100% invested as it doesnt take cash into account but if i was 100% fully invested in january with my trades it shows 26% gain :P good to know am 32% higher than the S&P for the first month… and if January is an indication of the rest of the year like many have mentioned, well lets just say SOUP for everyone for one year!.

  32. K says:

    just checked obama’s new weekly address

    “Americans know that our economic recovery will take years — not months. But they will have little patience if we allow politics to get in the way of action, and our economy continues to slide.”

  33. newbie says:

    Back to the topic at hand – XOM. :)

    Matt, I have two charting questions for you:
    In the candle version of the XOM chart, channel does not look as clear as the daily. (closing prices?) However, the descending triangle does.
    1. When do you use candles vs. closing prices?

    XOM has been out of the channel for as long as 2/3 the channel length. I presume the upper channel indicates accumulation. A fairly quick break downward can then indicate distribution.
    2. How long after the channel break, RELATIVE to the channel length, do we discount the significance of the upward channel?

    Thanks for pointing out XOM. I am short XOM via the SPY ;)

  34. junglegirl says:

    dave @5:44: I am afraid you misunderstood my comment. Sorry.

  35. newbie says:

    Does anyone subscribe to Barry’s Fusion IQ? How do you like it?
    Thanks.

  36. Charlie says:

    funny you mention that newbie. I was just reading up about Fusion IQ today and was going to ask the gang here if anyone was using it.

  37. K says:

    I bet you were because it was featured on John Mauldin’s newsletter lol

  38. newbie says:

    It will be a popular question as both John Mauldin, and Barry highlighted it in their emails. ;)

    BTW, also noted was that GDP was buoyed by excess inventories. What a crock. This will only get worse next quarter as companies were way too slow to cut production. Very, Very bearish.

  39. newbie says:

    Ah K beat me to half of it.

  40. K says:

    I just ordered 4 speakers for $37 lol i hope i didnt get scammed because they are worth $100 a pair lol.

    talk about excess inventory going on sale.

  41. K says:

    barry throws out a newsletter too? i only check his blog.

  42. Charlie says:

    actually K,

    i think Barry has a vested interest in Fusion I, doesn’t he?

  43. newbie says:

    They both made it clear that it is Barry’s product.

  44. K says:

    Yes Charlie it is Barry’s product and I have seen some of his previous charts since i do follow his blog post by post. i like the product but for my amount of capital $40/month isn’t justifiable yet.

  45. dave says:

    junglegirl @ 11.24: I misunderstood ?

    junglegirl Says:
    January 22nd, 2009 at 8:48 pm
    dave,
    I see why you did what you did. I’m not into that play right now. Too much potential government intervention of various sorts for anything more than a day trade for me.
    http://blogs.wsj.com/marketbeat/2009/01/22/the-geithner-bond-selloff/

    TLT has dropped 9 out of 10 days since Jan 15 – hardly a description of merely a daytrading vehicle. There have been many Treasury pronouncements of their intent to buy bonds on & since Weds 1/28. And bonds merely plumetted after & despite those pronoucements.

  46. admin says:

    newbie,

    You probably have noticed how volume surges at the end of the day. Closing prices are the result of a large war waged within the last few minutes of trading. So, it’s an important price. Also, many large traders dismiss intra-day movements as “noise” and only base their decisions upon closing prices. So, it’s important to look at charts using closing prices as well as candlesticks, bars, etc.

    Exxon has lost its uptrend for the moment. It may only be consolidating before moving up again. The future is unknown. But the chart looks toppy to me.

    Matt

  47. K says:

    i just looked at the upcoming data and this will either be one of the worst weeks for stocks or a fake rebound where i will load on shorts. YIKESSS

  48. dave says:

    K,

    Btw, one of the things that i enjoyed the most when i lived out by the ocean was watching from my br or lr a full moon touch & slowly “sink” into the ocean. If i remembered enough math & astronomy, i could caluclate how long it takes the full moon to disappear.

  49. K says:

    Dave i’ve always wanted to see and photograph that. boston water is on the east so i could catch a moonrise at most but havent yet found myself at night by the beach with a camera :)

    since i picked up stock trading my telescope has been collecting dust. but that is life and i might pick it up again anytime.

    now when the moon touched the water… did the market rise or fall? :P

  50. dave says:

    Matt & newbie,

    A week ago Carter Worth had good analysis about XOM’s overweighting in the S&P & versus similar BP.

    Also, often highly liquid mega cap companies with safe dividends are used as short-term parking places for money.
    http://www.cnbc.com/id/15840232?video=1009859835&play=1

  51. dave says:

    K,

    Some yrs ago i hung out all night outside with members of the local Astronomy Society for some astronomical event. There were about 25-30 people. Many people brought sleeping bags. The amateur astronomers were a great bunch of people & were all too willing to let us know-nothings view the planets thru their scopes many of which they had built themselves. I got the impression that they rightly did not think that much of people who merely threw bucks at equipment. Anyone who has never seen Saturn or Jupiter thru a powerful scope is missing something IMO.

    They also fixed bacon & pancakes for sunrise breakfast on an outside grill for everyone. I thought 7 or 8 boxes of bacon was way too much for that many people. However, it’s amazing how great bacon tastes after one has camped outside all night.

    One of my favorite things to do in November is to drive far outside the city to view the Leonids.

  52. newbie says:

    Matt,
    I rarely play individual stocks, I was more curious about your thought process. Thanks for the reminder on the value of closing prices. Sometimes I have seen an uptrend break and the stock fall into a downtrend fairly quickly. It then stays in the down channel for months. I never acted on those before, but if I see it again, and I know the ‘ fundamental story’ I will. XOM – no opinion.

  53. K says:

    i hope to one year (in the near future) to visit here and camp for the weekend of the great star party.
    http://www.astrohbg.org/CSSP/Information.html

    by the way as a fun fact. how many of you this year is international year of astronomy
    http://www.astronomy2009.org/

    (sorry the rest of you who arent interested i know this is mainly a stock discussion blog)

  54. dave says:

    K,

    Harrisburg in June won’t be as cold as Reno in November. LOL

    Here, i’ll tie the two subjects together for you so you won’t feel guilty.
    http://www.astromoney.com/arch.html

  55. K says:

    but thats the thing many people confuse astronomy with astrology lol.

    we just look at the stars and enjoy it. astrologers predict things with it.

  56. dave says:

    K,

    i know that, but “they” forget. That’s why i said yesterday Chief Astronomer & Chief Astrologer :)

  57. K says:

    can you just call me “Chief” ? haha

  58. dave says:

    Ok, Chief. We were going to get you a statue of Geronimo to keep you company. It’s going to get lonely in that satellite. Two Chiefs & no braves. Just know that you’re always going to bullish on APA.

    Well, it’s time for me to split for a Superbowl party easily the most over-hyped event of anytime. I’m sure that i would feel a little different if MY Ravens were still playing. But the line that fits today the best is…

    I remember Johnny Carson asking Ed McMahon about drinking on New Yrs Eve. Ed said that was for amateurs. I’ve bet on only one Superbowl ever. In 2003, i bet on $180 on TB & won $450. Although i’ll still watch, i’m actually looking forward more to today’s Puppy & Kitty Bowls on Animal Planet.

    Tomorrow…

  59. K says:

    i’m in it for the superbowl ads. enjoy! I bet godaddy will crush them all (just kidding)

  60. junglegirl says:

    dave,

    Yes, you continue to misunderstand my comment. I did not and do not mean that statement to in any way insult you. It would appear you are drawing an inference when I made none. I did not say whether I thought bonds would go up, down, or sideways. I only stated I didn’t want to play. Besides, something that falls for a number of days can also be day-traded for a number of days unless each and every “fall” occurs as a gap down–which is not the case here. There are many successful plays out there to be had, and just because I chose one and you choose another doesn’t make either of us right or wrong. Hopefully everyone on this board can be successful. Good luck to you.