As Exxon Mobil Consolidates, Is A New Rally Bubbling Up?

Key Points

• Exxon Mobil has been struggling below resistance near $119 for the past six months, but the stock rallied in recent weeks.
• An area of price consolidation often sets up a stock for fresh gains.
• Exxon Mobil's CEO said in June that he expects Permian Basin shale production to double in the next five years, helped by technological advances.
• The company has a 40-year track record of increasing its dividend. 

Exxon Mobil Corp. NYSE: XOM has been struggling below resistance near $119 as it forms a follow-on base after undercutting previous structure lows.

The stock has been quietly rallying in recent weeks, notching small weekly gains in above-average turnover. Its one-month return is 5.19%, which is not terrible, but it lags the Energy Select Sector SPDR Fund NYSEARCA: XLE, which is up 12.59% in the past month. 

An area of price consolidation isn’t necessarily a bad thing; it often means the stock is setting up for fresh gains. 

So is that the case for Exxon Mobil? 

Take a look at MarketBeat’s Exxon Mobil chart. It’s usually easiest to get a granular view if you set the chart to a bar or candlestick view, rather than a line view. 

Potentially Bullish Consolidation

The stock rallied to a high of $119.63 on February 2, then retreated into another consolidation whose low undercut the prior structure low. That type of price action can be bullish, as it offers a buying opportunity for investors with conviction to nab shares at a more attractive valuation. 

Exxon Mobil stock broke out of that base in late April and rallied to a high of $119.92, not much higher than the previous resistance. Once again, it couldn’t muster up the investor support to move up any further. The stock is currently trying to work its way out of a consolidation that began in early May. 

Some of the “meh” factor here is due to the company missing revenue estimates in the first quarter, which you can see using MarketBeat’s Exxon Mobil earnings data. Revenue of $86.56 billion was also 4% lower than revenue in the prior year’s first quarter. 

Should You Worry About The Six-Month Consolidation?

The current base is not so bad, especially with a healthy uptrend in recent weeks. Should investors be concerned that the stock has been mired below resistance for more than six months? 

If you take another look at the chart, you’ll see that Exxon Mobil rallied to an all-time high in April, capping a long run-up that got underway in late October 2020. It’s perfectly normal behavior for a stock to rally, then pull back, then resume its rally. That’s especially true of an institutional quality mega-cap like Exxon Mobil, that’s a leader in its industry.

Exxon Mobil is the largest component of the S&P 500 energy sector, with a weighting of 21.44%. Think about that for a second: Exxon Mobil’s value comprises more than one-fifth of the entire sector. 

Energy Sector Also Hitting Price Resistance

While the sector has been on the rise in recent weeks, the energy sector as a whole hit resistance since June, which meant other sectors, namely consumer discretionary and communications services, have a better three-month track record. 

Exxon Mobil, which was late to the shale business, is making up for lost time by investing more in the Permian Basin. 

In early June, CEO Darren Woods said the company is aiming to double the amount of oil produced from U.S. shale assets during the next five years.  

In December, Exxon Mobil said it was targeting production of up to one million barrels in the Permian Basin by 2027. The company also announced a five-year technology development initiative to support that production level.  

Signs Of Promising New Technologies

Speaking at a recent financial industry conference, Woods said Exxon Mobil is beginning to see “signs of some very promising new technologies” that could significantly improve production volumes in the Permian Basin. 

Exxon Mobil analyst ratings show a consensus of “moderate-buy” on the stock, with a price target of $124.32 and an upside of 11.17%. That would be 3.7% higher than its most recent area of resistance.

Enough Momentum To Move Higher?

If the stock is able to clear that resistance between $119 and $120, that could be a signal that it has enough momentum to carry it higher. 

But be aware: a well-established institutional favorite like Exxon Mobil, whose market capitalization is $447.68 billion and which has wide analyst coverage, is unlikely to have some major surprise that sends stocks rocketing higher. That situation is more likely to happen with a small or mid-cap stock or with a fast-growth tech. 

For now, the stock’s consolidation does appear bullish, and Wall Street has not lost faith in the company’s prospects. Exxon Mobil’s dividend yield of 3.25% and its 40-year track record of increasing the shareholder payout should provide some incentive for holding through the current correction.