2 Dow Stocks Reacting to Earnings

Key chart support is helping contain today's losses

Jul 27, 2018 at 11:18 AM
facebook twitter linkedin


Oil major Chevron Corporation (NYSE:CVX) reported second-quarter earnings of $1.78 per share on $42.24 billion in revenue -- lower than the $2.09 per-share profit on $45.59 billion in revenue analysts were expecting. While this quarterly miss initially sent CVX stock down as much as 1.5% earlier, it was last seen trading at a slimmer loss of 0.06% at $123.87, as traders consider news of the company's $3 billion share buyback plan.

This choppy trading just echoes the equity's longer-term price action. After falling more than 19% from its late-January highs near $134 to its early February lows around $108, CVX proceeded to rally back up to $131 by mid-May. More recently, the stock has pulled back to familiar support in the $121 region -- home to a 50% Fibonacci retracement of that early 2018 sell-off and its rising 200-day moving average. Year-to-date, though, Chevron is down 0.8%.

cvx stock daily chart july 27

Options traders were growing upbeat ahead of earnings, per the stock's 10-day call/put volume ratio of 2.60 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- which ranks in the 74th annual percentile. In other words, calls have been bought to open over puts at a quicker-than-usual clip, with most of the activity centered at the August 125 call.

Sector peer -- and fellow Dow member -- Exxon Mobil Corporation (NYSE:XOM) has been unable to shake off earnings-induced pressure, with the shares down 3.5% at $81.31. Exxon said second-quarter earnings arrived at 78 cents per share, well below the consensus estimate of $1.27 per share, amid declining production and increased costs related to refinery updates. Revenue, meanwhile, came in at a stronger-than-anticipated $73.5 billion.

On the charts, XOM has been in a channel of higher lows since its April 2 bottom near $72, and topped out at $84.40 yesterday -- its loftiest perch since Feb. 2. Today's drop has so far been contained by the equity's 200-day moving average, which appears to be on the verge of forming a golden cross with the 80-day trendline.

xom stock daily chart july 27

At least some options traders appear to be betting on a quick rebound for XOM stock over the next several weeks. The August 90 call is home to peak front-month open interest of 17,545 contracts, and data from Trade-Alert points to significant buy-to-open activity here back in May. If this is the case, the call buyers expect Exxon Mobil stock to break out above $90 by the close on Friday, Aug. 17.

 

Stop leaving money on the table with the same old broken options trading approach...

There is no options strategy that more perfectly capitalizes during earnings season better than this simple call and put buying strategy. Perfect for aggressive traders looking to recover their suffering portfolios so far in 2022. With the simplest possible options strategy, Schaeffer's team with 100+ years of options trading excellence, target 200% gains on every single trade. So many trades are being beaten down by the market, but don't be one of them! Don't waste another second... join us right now before the next trade is released! 

 
Schaeffer's Daily Bulletin Offer
 


 


 
Special Offers from Schaeffer's Trading Partners