Exxon Mobil, and the Energy Sector

With Oil prices hitting new lows every now and then, it’s hard to believe that pump prices in Singapore barely move an inch while the Energy Sector’s valuations have been dropping. The Sector’s performance move in tandem with oil prices, as higher prices would allow them to realise more revenue. That equates to more funding for oil exploration, but with oil at such low prices, it’s hard for these companies to break even, not to mention investing in such projects.

Being a technical analyst, I believe that charts tell more stories than fundamentals do. Personally, I have used charts to “forecast” news, whether if they meet analyst projections or not, and have thus further convinced me that technical analysis is the way to go.

The chart which I have picked out today would be that of Exxon Mobil , which I have mentioned in my previous post. Just like any other Oil and Gas company, Exxon Mobil’s stock price has been falling from a peak of 104.72 in 2014, to 66.55 in August last year. This puts the stock under my watchlist as I hunt down stocks that has been oversold due to market sentiments rather than fundamental reasons. Based on an article written by Alexander Valtsev on Seeking Alpha, he has issued a “HOLD” rating on this stock for an increase in risk in the company due to the low oil prices that would cause revenue to stagnate. However, he did mention that Exxon Mobil is fundamentally better than other players in the market, which is crucial in our stock pick. In this market conditions, we have to choose the cream of the crop to reduce our risk exposure and maximizing our returns.

Technically speaking, the stock has been hovering at the 61.8% retracement of the rally from 24 August 2015 to 2 November 2015. With an increase in trading volume at that level, along with a combination of bullish candlestick patterns, this is one stock that is bound to rally in time to come. My target price for this stock is $92, which is approximately a 18% gain from current price levels.

My opinion of the oil and gas industry would be that oil prices are in the midst of consolidating, and 2016 might be the year where oil prices would slowly regain its true value. What are your thoughts of the Oil and Gas Industry, as well as Exxon Mobil?

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