Todays Big Stock: Exxon Mobil (NYSE: XOM)

On Friday, Exxon Mobil’s Silvertip pipeline burst upstream from a refinery in Billings, Montana, where it delivered 40,000 barrels of oil a day. Up to 1,000 barrels, or 42,000 gallons, of crude oil flowed into the legendary Yellowstone River before the leak was stopped, according to Exxon Mobil estimates. The initial cleanup stages along the Yellowstone River are now being hampered as rising waters make it harder for Exxon Mobil to get to areas damaged by the crude spilled.

Twice in the last year regulators had warned Exxon Mobil of several safety violations along the Silvertip pipeline. The company decided to restart the line after examining its safety record and deciding it was safe. Then, the pipeline was temporarily shut down in May after officials in Laurel raised concerns that it could be at risk as the Yellowstone River started to rise.

Although Exxon’x recent spill wouldn’t appear to be anywhere near the catastrophe that the BP oil spill in the Gulf was, could the clean-up struggles and potential future liabilities create short-term volatility for Exxon’s stock? Please review the 1 yr. chart of XOM (Exxon Mobil Corp) below with my added notations:

The price to watch on any selling pressure would be the $80 level (blue). XOM usually finds support at $80 whenever above it. Whether XOM pulls back based on the recent oil spill news, or just because the stock has been on a nice short-term run already, $80 should provide formidable support. If not, and the $80 level were to break, XOM could see additional selling pressure.

The Tale of the Tape: Exxon Mobil has been in the news recently due to the rupture of its Silvertip pipeline. This news may have a short-term affect on the stock, XOM. The $80 level should provide support on any pullbacks, thus a long position could be entered. However, if the news were to get worse, and XOM were to break below the $80 support, a short position would be more advisable.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!

Christian Tharp, CMT