XOM has been one of the worst SPX stocks in the fourth quarter over the past 10 years
Exxon Mobil Corporation (NYSE:XOM) and
energy stocks have enjoyed a solid September, a month that is typically
cruel to stocks. Hurricanes Irma and Harvey created in higher oil prices in the wake of production delays. However, XOM's recent rally has it squaring off with a previous layer of technical resistance -- and with seasonal headwinds looming, it may be a good time to take a defensive stance on the overbought Dow stock.
Since falling to an
annual low of $76.05 on Aug. 31, XOM stock has managed to win back nearly 8% in the past month. Today, the blue-chip oil stock is up 1.2% to trade at $82.24. However, the equity has rallied right into its 200-day moving average, which contained XOM last November, and currently coincides with a 38.2% Fibonacci retracement of the stock's December-to-August plunge.
XOM also sports a 14-day Relative Strength Index (RSI) of 75.46 -- firmly in "overbought" territory, suggesting a short-term breather may be in the cards. Plus, per data from Schaeffer's Senior Quantitative Analyst Rocky White, XOM has been the worst Dow stock to own in the fourth quarter over the past 10 years, when looking at all S&P 500 Index (SPX)
components. In fact, the equity has averaged a fourth-quarter loss of 2.76%, ending positive only three times.
There is plenty of room aboard XOM's bearish bandwagon, too. While short interest is up more than 43% from an early April multi-year low to 38.15 million shares, it represents only 0.9% of XOM's total available float. More short selling could increase pressure on the energy name.
Furthermore, seven out of 18 analysts still maintain a "buy" or better rating on the stock, even though it's down nearly 9% year-to-date. Should history repeat itself for Exxon Mobil in the fourth quarter, a round of downgrades could exacerbate selling pressure on the shares.
In the options pits, call buying has been an unusually popular strategy during the past two weeks. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), XOM speculators have bought to open 4.06 calls for every put during the past two weeks, a ratio that ranks in the 100th annual percentile. A reversal of fortune for XOM stock could lead to an unwinding of these bullish bets.
Regardless of whether it's puts or calls, now is an attractive time to buy premium on short-term XOM options, considering they are pricing in relatively low volatility expectations at the moment. The stock's Schaeffer's Volatility Index (SVI) of 10% ranks lower than 97% of all other readings from the past year, while its 30-day at-the-money implied volatility of 12.8% ranks in the 16th annual percentile.