XOM could fall victim to bearish seasonality
This commentary first appeared on Forbes Great Speculations, where Schaeffer's Investment Research is a regular contributor.
August is officially underway, and Schaeffer’s Senior Quantitative Analyst Rocky White is back once again to outline the best and worst stocks to own for the new month. High energy prices recently helped Exxon Mobil Corp (NYSE:XOM) secure record profits for the second quarter, and the equity now stands slightly more than 50% higher year-to-date. However, seasonality shows XOM could cool off as August heats up, with the security appearing on White’s list of 25 worst S&P 500 performers for the month, looking back over the last decade.
According to White’s data, Exxon Mobil stock averaged an August loss of 3.8% over the past 10 years, and has finished the month positive only twice. Digging deeper, the last time the equity turned in an August win was in 2014 after adding a paltry 0.5% over the 31-day period.
At last glance, XOM was down 2.4% to trade at $91.81. From its current perch, a similar move lower would put the shares back below the 60-day moving average, as well as below the $90 level. Already down 5.5% within the first few sessions of August, a continued spiral would result in Exxon Mobil’s second negative monthly performance in 2022.
An unwinding of optimism amongst short-term options traders could have bearish implications. This is per XOM's Schaeffer's put/call open interest ratio (SOIR) of 0.68 that ranks higher than just 26% of readings in its annual range, which implies these traders are operating with a call-bias.
Further, a shift in sentiment amongst the brokerage bunch could send the shares lower still. Specifically, eight of the 14 analysts in coverage still recommend a “buy” or better. What’s more, the 12-month consensus price target of $102.90 is a 12.1% premium to Exxon Mobil’s current level of trading.