Exxon Mobil - hold and buy on pullbacks

Ticker: XOM

Author: Stock Analyst  Date: 2021/05/11

Since our recommendation on March 24, Exxon Mobil has gained 11.9% to reach our target price of $63.80.

The main reason for the rise in the oil and gas major's shares was the recovery in oil prices from $ 65 per barrel to almost $ 70 per barrel due to investors' expectations for a recovery in demand during the traditionally high summer season. In addition, at the end of April, Exxon Mobil presented quite successful first quarter financial statements, in which it showed the ability to generate free cash flow, which is enough both to pay high dividends and to reduce the debt that has increased in a difficult 2020.

In the near future, we plan to revise our target price for Exxon Mobil shares, taking into account the results for the first quarter, upward. However, in the short term, the stock looks rather overbought after the rally, which happened on the background of financial statements and the rise in oil prices. In such a situation, we recommend waiting for local corrections for purchases.

Technical analysis

From a technical point of view, Exxon Mobil shares failed to gain a foothold above the previous local high and formed a shooting star reversal pattern. In addition, the relative strength index shows local overbought stocks. In such a situation, it is advisable to open long positions when correcting closer to the 50-day moving average located at $ 57.8.