This page has been archived and commenting is disabled.

World’s 2nd Biggest Stock Breaks 28-Year Trendline

Tyler Durden's picture




 

By Dana Lyons, partner at Lyons Fund Management and founder of 401kPro.com

 

On March 24, we posted a rare piece on an individual stock. As we do not invest in individual stocks, they are typically not our focus. Therefore, it takes extraordinary circumstances to inspire a post on a single stock. That was the case with the March 24 post which noted the fact that Exxon Mobil (XOM), the world’s 2nd biggest stock, was testing a trendline that began back in 1987.

The origin of the trendline, based on a logarithmic scale of XOM, is the low point of the October 1987 crash. It then precisely connects the 1994 and 2010 lows. Interestingly, the stock stopped on a dime in March once it hit the vicinity of the post-1987 trendline. I say interestingly because, at the time, the stock appeared to be in no-man’s land. There were no obvious support or resistance levels in the vicinity. And yet, the stock stopped right on the trendline. It then proceeded to “walk up” the trendline for the next 18 days.

To those who dismiss the influence of technical analysis and charting techniques on the behavior of stocks as completely random, I can hardly think of a better example of counter-evidence than this. What are the odds that a stock “respecting”, or adhering to, a nearly 3 decade-old trendline is completely random – for 18 days? Furthermore, after bouncing off this trendline into May, XOM returned to it over the past few weeks. It spent 6 straight days sitting squarely (again) on the trendline…before breaking below it yesterday.

This breakdown marks the first day that Exxon Mobil has ever closed below this trendline. Now, assuming the stock’s behavior around the trendline is not completely random, and considering its capacity as the 2nd biggest stock in the equity market, the effect of this breakdown may be profound. Absent an immediate reversal back above the trendline, this loss of 28-year support would appear to open the door to more downside in the stock.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sun, 06/07/2015 - 14:54 | 6172072 DavidC
DavidC's picture

Why am I reminded of this?!

https://www.youtube.com/watch?v=JlSQAZEp3PA

DavidC

Sun, 06/07/2015 - 15:09 | 6172112 BuddyEffed
BuddyEffed's picture

Today's Doonesbury has great insight on trickle down economics.

http://doonesbury.washingtonpost.com

Sun, 06/07/2015 - 15:36 | 6172189 Dubaibanker
Dubaibanker's picture

It's tough for US born and US educated people like Dana from Lyons Fund to appreciate that there is world outside of the US.

'That world' (of 95.37% of population) has now started taking a larger share of the global pie and is eating the lunch of American corporations.

A decade ago, companies like Lukoil (USD 38.8 billion of market cap today when it is at the lower end of its 5 year price), Gazprom (USD 58 billion of market cap again lower end of 5 years by about 70%) or CNOOC (USD 67.5bn market cap and at the lower end of a 5 year chart by over 40%) and PetroChina (USD 358 billion of market cap and again lower end of its 5 year price by about 25%) have taken a lot of market share from dear Exxon and relegated it to the No 5 position in Global 500 list of Fortune. Just these 4 comapnies have a market cap of USD 522 bllion which is higher than the market cap of Exxon at USD 352 billion today. 

The weakest stock amongst all 5 named above is XOM. https://www.google.com/finance?q=NYSE%3ACEO&ei=TpV0VfCQCsem8QPezYDoDw, except for the US sanctioned Gazprom over the last 2 years.

To think that these companies were not at all at a global scale and some of them did not even exist 20 years ago and Gazprom is oldest at 26 years of ripe young age. None of them were even listed until 2002 onwards.

In 2006, Exxon peaked for the last time as No 1 in the world. Many a times it was No 2 behind Walmart.

It has declined consistently ever since and in 2014 stands at No 5 globally. http://fortune.com/global500/

Given the oil price decline and the fact that they have sold several Exxon assets in many countries, Exxon should be a bit further lower in 2015. 

ExxonMobil descended from the original Standard Oil born in 1870. After 145 years, it is time to let the old ones die and let the new ones grow, who are outside US and is another indicator of how US is losing its grip on the world.

Yes Exxon is sliding and will slide further. It is a no brainer, with or without the technical charts!

Sun, 06/07/2015 - 17:23 | 6172432 negative rates
negative rates's picture

Remember the valdez, the walrus's do to this day, and they do NOT thank you, exxon.

Mon, 06/08/2015 - 00:05 | 6173261 Squid-puppets a...
Squid-puppets a-go-go's picture

XOMbie massacre?

Sun, 06/07/2015 - 18:15 | 6172548 assistedliving
assistedliving's picture

let the old ones die and let the new ones grow,

yeah, yeah good ole USofA sucks and all that coming from the Sh*thole money laundering, gun running, drug smuggling

capital aka Dubai.

USA 4& of World Pop.  20% share of WGDP. Just wait til XOM buys BP so stfu

Sun, 06/07/2015 - 19:13 | 6172682 Max Steel
Max Steel's picture

LOL .   If you adjusted US GDP for real inflation for only last couple of decades, US GDP would only be around $6 trillion. Given a debt to GDP ratio of 300% and unfunded liabilities to GDP ratio of 2500%, what should US bonds be yielding?
Shadowstat: http://www.shadowstats.com/alternate_data/inflation-charts

If you adjusted US inflation by the average Chapwood Index for the 4 years shown above for just the last decade, US GDP is about $6 trillion.

SINK IN  ASLIVING 

Chapwood Index :http://www.zerohedge.com/news/2015-05-29/inaccurate-statistics-and-threa...


 

Mon, 06/08/2015 - 03:27 | 6173433 Dubaibanker
Dubaibanker's picture

Hey assistedliving...go take your meds..and tell mama not to wake you up until lunch is ready....and dont forget to take your head out of your ass...must be tough on your neck...

Whats with the ad hominem attack on Dubai? Can you show me some proof of drug smuggling in Dubai? What has Dubai got to do with this article on XOM?

By the way, Dubai puts people behind bars for life for drugs. They arrest people with a speck of drug on them while passing through the airport. Of course, shit happens everywhere, but their rules are amongst the toughest in the world keeping crime at bay.

Drugs are smuggled (under the control and management of the US military) from Afghanistan as well as Mexico/Colombia. http://www.globalresearch.ca/drug-war-american-troops-are-protecting-afg...

Money laundering world capital is NYC. http://www.washingtonpost.com/business/capitalbusiness/federal-agencies-...

Read this you moron: http://www.nytimes.com/2012/07/03/opinion/throw-out-the-money-launderers...

London is America's co brother in money laundering: http://www.independent.co.uk/news/uk/home-news/london-property-boom-buil...

Global gun running is done by US military and CIA etc. http://www.zerohedge.com/news/2015-03-23/us-loses-500-million-weapons-gi...

US GDP has been shrinking as a percentage of global GDP on PPP terms for over 2 decades now. Even on nominal GDP it is second largest and is at 34% versus China's 40%. http://finance.yahoo.com/news/does-us-declining-share-world-110628107.ht...

China's share jumped a massive 152% between 2001 to 2011 while US share declined during the same period by 32%. http://www.ecominoes.com/2012/11/us-share-of-world-gdp-falls-32-since.ht...

Look here: https://www.quandl.com/collections/economics/gdp-as-share-of-world-gdp-a...

Consider yourself an educated chap after you have read all the above links.

Mon, 06/08/2015 - 12:55 | 6174775 assistedliving
assistedliving's picture

all i will say is nice try carpetbagger banker of all things.  So easy bad mouthing the biggest, lumpiest, freest (relative to DXB anyway) target in the World.  Talk about fear of Xhitting where you eat. i'll leave it to you to propagandize Dubai.  Yes, it is getting harder and harder to say it (which may well be a good thing: we respond best to a challenge and we've had none these past decades) but the USA is still No. 1 in my book

Sun, 06/07/2015 - 15:51 | 6172243 lasvegaspersona
lasvegaspersona's picture

Gary T only sees humor when it is Right of center. No lefty has ever caught his attention.

Sun, 06/07/2015 - 14:55 | 6172073 chunga
chunga's picture

This couldn't be rigged for a buyback could it?

Sun, 06/07/2015 - 15:24 | 6172137 CPL
CPL's picture

How? 

They've got projects all over the place in the middle of development.  EPS is 6 and change, dividend pay out is nearly four bucks a year, unless they cut the dividend payout for 20 years and focused on buy back with the capital not spent in dividend payouts.  Although inflation would stop that idea in three or four years with real inflation running higher than their net profit margin and their operating costs.  Inflation would end up strangling them and the buyback effort wouldn't amount to much.  Nor can they change the dividend offer because 50% of the company is institutionally owned, no way the pension funds or stock boards that own the stock would let that go, most of them are severely underwater already and that dividend is their bread and butter in a mostly dogshit sandwich market.

XOM, like anyone else that stayed in the market past 2010 is pretty much fucked and have no choice but to run with the real inflation rate or they bust. Their only option is to move to another currency that doesn't have the same inflation issues (cough...bitcoin...cough) to properly deleverage and buy themselves back.

The share price action is more likely attributed to the 50% institutional ownership signaling another round of TARP/QE for a buy in, if you go look at the chart, that drop and pop on the chart is an indication someone is about to print a fuck tonne of money.

Sun, 06/07/2015 - 15:24 | 6172156 DeadFred
DeadFred's picture

One more support before free fall. If it breaks below 80 watch out, until then expect a bounce.

Sun, 06/07/2015 - 15:26 | 6172167 CPL
CPL's picture

Instituational owners expect another round of freshly printed credit (TARP/QE) is more likely.

Sun, 06/07/2015 - 15:36 | 6172200 CarpetShag
CarpetShag's picture

It's a false breakout below the cock& balls formation. Classic trap.

Sun, 06/07/2015 - 15:49 | 6172238 bonin006
bonin006's picture

Small companies with large insider ownership would be most likely to manipulate the stock down so they could buy more on the cheap. Big companies with mercenary management (not saying that is the case for XOM, but in general) convert company money to their own money at a very inefficient rate by stock buybacks to drive the price higher so they can cash in their options. By inefficient I mean for example, a 5 billion dollar buyback which temporarily drives the stock up a little might net the management 5 million dollars. It would be better for the shareholders if management just stole the 5 million directly.

The campaign funding for politicians works the same way - allow companies to engage in billions of dollars in fraud in exchange for a few million in campaign contributions.

Sun, 06/07/2015 - 14:56 | 6172079 oklaboy
oklaboy's picture

now what could cause that????? hummmmm, lemmie guess...

Sun, 06/07/2015 - 14:59 | 6172092 Stanley Lord
Stanley Lord's picture

From a technical analysis standpoint, that is a badly drawn trendline.

Sun, 06/07/2015 - 15:29 | 6172179 Salah
Salah's picture

doesn't matter...Neptune in Pisces until 2026 = oil, oil, oil (found everywhere, by everybody)

Sun, 06/07/2015 - 22:15 | 6173060 Yancey Ward
Yancey Ward's picture

No, it is a good one.  You can't really see it on the monthly candlesticks, but the low on October 19, 1987 is 8.38, and hits the trendline dead on.  I had the exact same impression when I looked at their chart, but that low is really there on the trendline's start.

Sun, 06/07/2015 - 15:03 | 6172098 atomp
atomp's picture

If everyone ignores technical analysis, maybe it will just go away.

Sun, 06/07/2015 - 15:17 | 6172129 zvzzt
zvzzt's picture

bollocks, just ignore that bad analists/researchers (granted, lots of them around)

Sun, 06/07/2015 - 15:27 | 6172170 DeadFred
DeadFred's picture

You are right, if everyone ignore it it would go away. Until then it's powerful. The algos read the charts like they were sent from God

Sun, 06/07/2015 - 15:27 | 6172174 CarpetShag
CarpetShag's picture

Extensive back testing has shown that the above method can predict trend changes at least 43.22% of the time.

Sun, 06/07/2015 - 22:17 | 6173063 Yancey Ward
Yancey Ward's picture

I like this comment, and hope you were doing this tongue-in-cheek since it makes the point even stronger!

Sun, 06/07/2015 - 22:23 | 6173080 bunnyswanson
bunnyswanson's picture

You sound like someone I know, who lives off family money without a need to work, just decide what to buy next.  Her view:  That my negative posts ie., thoughts will destroy the shining light of goodness and hamper civilizations march toward love and enlightenment.  Focus on the positive, she says.  It's a marathon, not a sprint, she says.  I both envy and despise her for having been sheltered from the storm. Oh well, friends come and friends go.

Sun, 06/07/2015 - 15:06 | 6172104 twerkerworker
twerkerworker's picture

I prefer chicken entrails. I can understand the mess.

 

Sun, 06/07/2015 - 15:56 | 6172252 lasvegaspersona
lasvegaspersona's picture

The trendline for runes prediction are significantly better (Students T test <.001) than entrails. Better yet is the WAG technigue though divining has produced similar results. In the end the crystal ball remains the definitive technique especially as graphene crystallography prodedures improve.

Sun, 06/07/2015 - 15:11 | 6172116 falak pema
falak pema's picture

the oil moguls are gonna shrink like tom thumb! 

Sun, 06/07/2015 - 15:22 | 6172123 Pure Evil
Pure Evil's picture

I guess this means the price of gas is heading up while oil continues to drop in price?

I like the way the price of gas will jump 15 or 20 cents overnight then take weeks to drop a cent or two only to jump another 15 to 20 cents while only droping a few cents down again after that.

I can still remember the days when gas prices were relatively stable for years at a time instead of this back and forth like someone with a bipolar disorder.

Sun, 06/07/2015 - 15:20 | 6172147 F0ster
F0ster's picture

Buy back time.

Sun, 06/07/2015 - 15:22 | 6172151 Bighorn_100b
Bighorn_100b's picture

XOM masquerades as a oil company but really is a bank. Just look at the difference in the price of gas in cash vs. ATM or credit credit card purchases.

XOM is ripping off the consumer. Live by the ATM, die by the ATM.

Stay out of debt, period!. Pay cash and not be tracked.

Sun, 06/07/2015 - 15:31 | 6172186 CPL
CPL's picture

Yup, they obtain TARP/QE via CDFI's through the lending institutions that are their 'partners' (BOA, CitiBank, JP Morgan) to loan the pipelines built with other government loans back to the government.  XOM doesn't actually do the oil development, they capitalize it with cash/equipment and supply the equipment and subcontract the work out.  It's probably been 70 years since they actually dug a well.

Sun, 06/07/2015 - 15:28 | 6172173 ebworthen
ebworthen's picture

All the way back to '87?  That was a good year.

Oil is the commodity that has underpinned the industrial and agricultural revolutions since the early 1900's; this could have implications far beyond the stock price or equity markets.

Sun, 06/07/2015 - 15:29 | 6172178 CarpetShag
CarpetShag's picture

Define "break". How many percent above or below.

Sun, 06/07/2015 - 15:50 | 6172240 q99x2
q99x2's picture

Can't tell for sure but it looks like it broke its trend line in 2009 also and that looking back from today it only appears to have broken the trend line once.

Sun, 06/07/2015 - 21:42 | 6172952 Wild Theories
Wild Theories's picture

just from eyeballing, looks like it already broke the trend in 2010-2011 if you drew it from 1985

 

that reminds me, gotta go look at all my charts on log scale again

Sun, 06/07/2015 - 16:39 | 6172340 JLM
JLM's picture

When the pro's refuse to support the trend line of a stock price you know they all "long gone" (pun) and only the patsy's are left (retail investors - you and I).  The logic is if the pro's won't support the price then I sure as hell better not either. Investing is that simple..... .

Sun, 06/07/2015 - 16:43 | 6172346 adr
adr's picture

Charts and trend lines don't mean anything to real business. They only mean things to algorithms and traders looking for a reason a stock is trading where it is.

Essentially giving reason to bullshit.

Why does Apple trade where it does? Who the fuck knows. It trades at a level because it trades at a level. There is no reason for it and there is no control of it.

Sun, 06/07/2015 - 17:13 | 6172403 luna_man
luna_man's picture

 

 

Yeah, Dana, I'm with you and look to own near $57.00!

 

in the mean time, you got it..."SHORT"

Sun, 06/07/2015 - 17:24 | 6172433 max2205
max2205's picture

Long gold short XOM.

Sun, 06/07/2015 - 18:06 | 6172514 buzzsaw99
buzzsaw99's picture

quarterly (march 2015) reported revenue was down big time. if oil prices don't recover that huge dividend is in grave danger imo.

Sun, 06/07/2015 - 19:35 | 6172734 Pal
Pal's picture

Well having grown up around oil, but not own it, and having worked for Mobil aand Mobil Norway in the N. Sea before the merger I am a bit prejudiced probably.  The energy business is in my opinion the biggest global economy driver in the world and has been for many decades. It's an amazingly efficient business.  I don't think there is any other industry in the open, industrialized world that is as efficient.  If more industries were operated like the energy sector ...referring to USA. rather than the crony BS, fascism, bankster racket, cckscking MOFOs in DC ClusterfckingOrgyfest that is the rest that is the rest of the USA  economy we would not be going down the shitter like we are now.

Hate all you want but I stand by my claims ..aint perfect but I believe the facts support my  rant.  Need more sectors like oil not less.

 

 

Sun, 06/07/2015 - 22:20 | 6173069 Yancey Ward
Yancey Ward's picture

The dividend isn't in any danger, and if it really is, then it won't matter what stock you own- you would be better off owning guns and ammo.

 

However, I do think the stock is going lower from here.

Mon, 06/08/2015 - 00:41 | 6173320 TiggrAndrews
TiggrAndrews's picture

The only factor keeping major oil stocks from free falling like small-med cap oil are their dividend payouts, plus a false belief that oil prices would have rebound to $80 by now.  XOM has fallen 27% since June 2014 whereas Brent has fallen 40%-50%.  Q1-2015 earnings for XOM were 4.9B (versus 9.1B in 2014) and there-in a PE ratio of 18X based on their 352B market cap., whereas resource companies typcially hold at 8X to 13X.  If you believe oil prices will rebound, smart money is on small-med cap. companies focussed on light crude oil - those have have fallen by as much 70% to 90% since June 2014 and are ripe for buyouts.  You may see a short renewed interest in XOM at its current price, but it will be temporary as large cap oil prices have still not hit bottom yet.

Mon, 06/08/2015 - 02:32 | 6173403 falga
falga's picture

Perhaps it marks the end of expensive and environmently sensitive crude oil as fracking technology favors natural gas, renewables and solar... Exxon better reinvent itself quickly!

Do NOT follow this link or you will be banned from the site!