2 Dow Stocks Reacting to Earnings

Key chart support is helping contain today's losses

Karee Venema
Jul 27, 2018 at 11:18 AM
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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.


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