2 Oil Stocks Slumping as Crude Backtracks

Exxon Mobil Corporation (XOM) and Chevron Corporation (CVX) are trading lower as crude oil erases some of Monday's gains

by Kirra Fedyszyn

Published on Feb 23, 2016 at 12:14 PM
Updated on Jun 24, 2020 at 10:16 AM

After surging more than 6% on Monday, crude futures are pulling back today, with April-dated oil trading 4.8% lower at $31.79 a barrel. Against this backdrop, two oil stocks -- and Dow components -- are following oil prices lower today, as traders weigh crude's slide against new analyst notes on Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX).

XOM is trading 0.7% lower at $81.82, despite a price-target hike to $84 from $83 at HSBC. The stock has been a relatively strong performer as crude oil has moved off its multi-year lows. Specifically, XOM outperformed the S&P 500 Index (SPX) by more than 9 percentage points over the last two months, and is up 5% so far in 2016.

But analysts are rather lukewarm on the stock. Eight brokerage firms rate XOM a "hold" or "sell," compared to just six "buy" or better ratings.

Option traders, meanwhile, have been clearly bearish. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio of 2.28 is higher than 98% of all readings in the past year.

XOM also has a Schaeffer's put/call open interest ratio (SOIR) of 2.15, in the 100th annual percentile -- indicating near-term options traders have hit an extreme in their preference for puts over calls. If Exxon Mobil Corporation (NYSE:XOM) can continue its positive year-to-date trend momentum, a shift in sentiment could easily propel the shares higher.

HSBC took a divergent approach to CVX this morning, dropping its price target by $1 to $100 -- still at a level the shares haven't seen since last June. The stock, down 2.4% at $86.68 today, hasn't performed as well as XOM in 2016. CVX is down nearly 4% year-to-date, but has still managed to consistently outperform the SPX in recent months.

Unlike XOM, the brokerage bunch remains firmly in CVX's corner. Twelve out of 16 analysts call the stock a "buy" or better, with not a single "sell" on the books.

At the ISE, CBOE, and PHLX, CVX's 50-day put/call volume ratio of 1.82 is in the 94th percentile of its annual range. But it looks like these bears may already be backing off, as its 10-day put/call volume ratio stands at 1.26 -- in the mild 51st percentile.

For options traders looking to make a play on oil, CVX may present a prime opportunity at present. The security's Schaeffer's Volatility Index (SVI) of 29% is lower than 75% of all readings from the past year, indicating that premium on short-term options is relatively modest. Meanwhile, Chevron Corporation (NYSE:CVX) has a Schaeffer's Volatility Scorecard (SVS) of 85 -- meaning that the stock has made some outsized moves compared to what the options market has priced in over the past year.

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