Don't Ignore This Chart!

XOM is Turning Around Back Into Leading vs. $INDU

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The Energy sector keeps coming back on my radar as a sector that's potentially turning around. The sector has been in a relative downtrend for ages already and, from a long-term perspective, things still do not look very good. However, things never look good just before or in a turnaround situation after a prolonged downtrend.

So, with that being said, Energy is still negative on LT time frames, BUT.... I keep seeing positive signs/ripples popping up at shorter timeframes and in individual stocks.

I spoke about this in this week's Sector Spotlight show, I talk about it in today's Your Daily Five show (airing 1 pm ET on 4/30) and, while I was looking at the Relative Rotation Graph for the DJ Industrials index, once again XOM popped up with an interesting rotation.

The chart above shows the RRG for all Dow stocks against $INDU, with XOM highlighted. The swift rotation back into the leading quadrant after dipping into weakening is always a pattern that interests me. The reason is that these are rotations (trends) that have completed the first leg of a move and are now setting up for a second (or third, fourth, etc).

The way I see it, that means that there is a little less risk in onboarding this trend than there was at the initial rotation.

When I then check the price chart for XOM with relative strength against $INDU, a nice breakout attempt is showing up. I am watching the gap area between $46.20-$47.20 as resistance and I would like to see it cleared before jumping on a trade. However, when it does, a good risk-reward trade seems possible. There is some old resistance coming off the 2011 low around $50, but the real barrier, I think, is found near $60 where all major lows since 2012 are more or less lining up.

Such a break will undoubtedly help the rotation on the RRG push further into the leading quadrant and make XOM a very attractive stock at least for a few weeks to come!!

#StaySafe,

--Julius


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Julius de Kempenaer
Senior Technical Analyst, StockCharts.com
CreatorRelative Rotation Graphs
FounderRRG Research

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Feedback, comments or questions are welcome at Juliusdk@stockcharts.com. I cannot promise to respond to each and every message, but I will certainly read them and, where reasonably possible, use the feedback and comments or answer questions.

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Julius de Kempenaer
About the author: is the creator of Relative Rotation Graphs™. This unique method to visualize relative strength within a universe of securities was first launched on Bloomberg professional services terminals in January of 2011 and was released on StockCharts.com in July of 2014. After graduating from the Dutch Royal Military Academy, Julius served in the Dutch Air Force in multiple officer ranks. He retired from the military as a captain in 1990 to enter the financial industry as a portfolio manager for Equity & Law (now part of AXA Investment Managers). Learn More
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