Blue chip Exxon Mobil Corporation (NYSE:XOM) is trading modestly higher today, up 0.2% at $69.24, though continued pressure from its 40-day moving average is thwarting the stock's attempt to break free from its year-to-date lows in the $66-68 region. Another trendline, in the form of the equity's 70-day moving average, is sitting just above, and could spell trouble for the oil-and-gas producer, if history is any indicator.
According to a study from Schaeffer's Senior Quantitative Analyst Rocky White, there have been five other times in the past three years XOM has run up to its 70-day moving average. The energy stock was lower three weeks later after each signal, averaging a loss of 5.3%. A similar move would put Exxon just atop the $65.50 level -- site of its Dec. 24 close.
Plus, history suggests that put buyers could bank a big profit on this bearish technical signal, should the stock's Schaeffer's Volatility Index (SVI) hold near its two-year average of 25.6%. In fact, White's data shows that an at-the-money XOM put option could potentially return 204% over the next 10 days on another expected decline from its 70-day trendline. The security's SVI was last seen at 22%, which ranks in the 36th percentile of its annual range.
What's more, Exxon Mobil is set to report third-quarter earnings before the market opens next Friday, Nov. 1. The Dow stock has a dismal history of earnings reactions, which doesn't do much to help its case. Based on next-day moves from the last two years, XOM has only been positive after three of the past eight reports, averaging a single-session swing of 2.5%, regardless of direction.