Range-Trading ExxonMobil (NYSE:XOM)
Feb 13th, 2009 | By Charles Delvalle | Category: Chart of the DayOne of the most boring, yet profitable ways to make money in the market is buying and selling stocks that trade within a range.
It’s boring because it can be repetitive and not really offer any excitement (other than making money). It’s profitable because it’s really easy to figure out when you’re wrong and get out at a small loss (the hope is that it doesn’t happen the first time you trade the stock!).
One recent example of a range-trading stock is ExxonMobil (NYSE:XOM).
Over the past three months, Exxon has traded within a roughly ten percent range. Every time it hits $74, it begins to rally back up to around $81, and then it falls back down to $74.
The way to play this pattern is simple. Every time the stock drops to around $74, buy shares in it (or buy a call option on it). When it reaches around $81, sell your shares and short the stock (or buy a put option) and stay in your position until it hits $74 again.
You should always position stop-losses in case you are wrong. If you buy at $74, a stop-loss at $72 would be good. That way you keep any potential losses small.
You see, there’s nothing too exciting about this pattern. In fact, it bores me to tears. But at least you can make money from it hand over fist.
Charles Delvalle is a self-taught market-timing professional and value analyst who's followed and invested in the market for the past ten years. He uses a unique combination of technical and fundamental research to pinpoint rapid profit opportunities with stocks and options.
Charles is also a staunch contrarian and takes pride in finding undervalued sectors and discovering undervalued, cash-rich companies. He frequently mocks government stupidities and points out the "inaccuracies (or lies, take your pick) that government reporting frequently dispels as "truth".
I don't think it's going to work this time.
Have you seen earnings estimates and compared the valuation to exxon's competitors?
Exxon HAD a rising wedge which is now gone. Rising wedges are bearish.
I think it breaks thru the old range and when that happens, the door will be quite crowded when funds start to sell it off.