2 Oil Stocks That Could Slide Soon

XOM and SLB have been clinging to their year-to-date breakeven levels

Deputy Editor
Dec 9, 2019 at 11:00 AM
facebook twitter linkedin

Two oil stocks that have been fighting to stay atop their year-to-date breakeven levels lately are blue chip Exxon Mobil Corporation (NYSE:XOM) and Schlumberger Limited (NYSE:SLB), which are up 1.7% and 2.1% for the year, respectively. These marginal gains could be short lived, however, since bearish technical signals are flashing on the charts for both securities. Below, we'll look at these signals and what they might mean for XOM and SLB. 

Starting with Exxon Mobil, the equity just ran up to its 60-day moving average. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, XOM has seen six similar run-ups in the past couple years, and was positive two weeks later only 17% of the time, averaging a 3.23% loss. From its current perch at $69.57, a similar move lower would put the stock at $67.32. 

XOM Dec 9

While short interest has seen a 4.4% increase in the past two reporting periods, there's still plenty of room on the bearish bandwagon. The 42.07 million shares sold short represent just 1% of XOM's available float, and less than four days at its average pace of trading. This could create headwinds for the security, should these traders continue to ramp up their pessimistic positions. 

Turning towards Schlumberger, White's data shows the security coming within striking distance of the 160-day moving average four other times during the same time frame, with each 10-day return in the red. SLB averaged a 10-day loss of 8.41% during these signals. This would put the shares at $33.94, considering where they're currently sit at $37.06. 

SLB Dec 9

Short interest on SLB has been scant, too, with the 27.55 million shares sold short representing just 2% of the stock's available float. However, pessimism is beginning to appear in the options pits. While the equity's 10-day put/call volume of 0.62 shows that calls are still outnumbering puts on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), this ratio sits higher than 87% of all other readings from the past year, indicating that these bearish bets are being picked up at a quicker-than-usual clip. 

For those wanting to speculate on SLB's next move with options, now might be an opportune time. The oil concern's Schaeffer's Volatility Index (SVI) of 31% sits higher than just 20% of readings from the past year. Exxon's options look cheap right now, too. Its SVI of 16% sits in the incredibly low 12th percentile of its annual range. 


Special Offers from Schaeffer's Trading Partners