XOM Short Idea - Rising COVID Cases, Energy Industry Big PictureI believe that the market was being overly optimistic with the Pfizer vaccine news. Crude Oil futures had a similar move with the news. I think the fundamentals for oil companies hasn't changed and that things will only continue to get worse with the rising COVID cases. On a big picture level, investors can see that alternative sources of energy are becoming more realistic and are going to be the future.
On Friday after close, President Trump held a press conference for Operation Warp Speed, giving positive news about the vaccine efforts. With this, we could see another similar pump to the Pfizer vaccine news on Monday. If this happens I will wait to see this forming a downtrend before entering my position.
I also think the Joe Biden win could weaken oil stocks more, especially considering his discussions on phasing out oil and moving towards renewable energy. If Trump somehow pulls off the court cases and comes back for a second term, we could see Oil stocks pump again. So those court cases and recounts are a risk of this trade.
This stock is near a key level. On the monthly chart, 30 has been the last support level since July 2002. It has shown support there in October 2008, July 2010 and recently in March 2020 during the COVID flash crash. On the daily chart, there has been an increased amount of buyers recently around late October/early November when it hit this level - showing that many traders see this as a key level.
Looking at the monthly chart, there aren't any other key pivot points tested as much as this 30 level. Maybe roughly 28, 25 and 20 - but these are just rough guesses based on this chart. I need to take a deeper look into the weekly and daily to see key long term points.
I have highlighted a few rough points where price has held in the short term. The lowest I think this can go is 30 because it's been shown that buyers meet at this level. If COVID cases rising causes more shutdowns, this stock could break that level. I think this could be possible because many investors/traders may see COVID shutdowns hurting the company even more in the short term. In the long term, investors may have a negative view on oil companies, especially with the recent boom in alternative energy stocks. I think if it breaks this 30 level, there will be many traders panic selling because they see 30 as a very important level.
My main trade idea is to short it down to 30 at the most if it shows signs of a continuation. Hold off on entering if Monday pumps a bit based on the Friday vaccine press conference. If it shows weakness at 30, I may enter another short position.
