I mentioned earlier this morning that an “Ascending Triangle” was forming in Crude Oil prices (daily), but there’s been an even larger triangle forming on the price charts of Exxon-Mobil (XOM). Let’s take a look at the weekly and daily structure.
We can draw loose trendlines starting with the 2008 highs of $92.50 and then off the October 2008 lows to form a consolidating triangle (symmetrical) as shown above.
Price is now coming close to the “apex” or convergence price (roughly $69/$70) of the triangle, which often produces a price breakout move one way or the other (according to the Price Expansion/Contraction Principle).
For now, the upper boundary is $70 (though I’d stretch it to $72.50 to account for the numerous moving averages and Bollinger Band boundaries/resistance overhead - price would need to clear all of those before one should be bullish) and the lower boundary is $67.
It would appear - looking at this - that the odds may seem to favor a downward break over an upward break, just looking at the EMA structure and current trend structure.
Let’s dip down to the Daily chart:
This is an internal or terminal triangle that takes into account the most recent price consolidation (converging trendlines as shown).
Again, we would need a break above $71 to get bullish or a break beneath $68/$69 to get bearish. The momentum oscillator is also contracting in anticipation of a breakout.
Should Crude Oil prices fall from here (triangle break to the downside beneath $70 per barrel), then Exxon-Mobil (and other oil-related stocks) would almost certainly break to the downside as well (and vice versa).
For now, let’s keep watching these triangles in anticipation of a trend/impulse/momentum move that would emerge when these boundaries are broken.
Corey Rosenbloom, CMT
Afraid to Trade.com
Follow Corey on Twitter: http://twitter.com/afraidtotrade
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