Buy Chevron and Exxon Mobil for Their Generous Dividends - TheStreet.com

Oil giants Chevron  (CVX - Get Report) and Exxon Mobil  (XOM - Get Report) report second-quarter earnings before the opening bell on Friday, Aug. 2. My call is to buy these stocks for their generous dividend yields of 3.83% for Chevron and 4.62% for Exxon Mobil. Then use the charts below to add to positions on weakness.

Both integrated oil and gas companies are components of the Dow Jones Industrial Average and both are perennial members of the "Dogs of the Dow."

Both stocks have been following the price of Nymex Crude Oil Futures lower since the commodity set its 2019 high on April 23. Chevron peaked on April 8 and Exxon Mobil peaked on April 23.

Analysts expect Chevron to earn $1.74 to $1.80 per share when it reports premarket on Friday, Aug. 2. The company will feel the effects of lower oil prices, but it was able to beat estimates in the past three quarters.

Analysts expect Exxon Mobil to earn 76 cents per share when it reports premarket on Friday, Aug. 2. This energy giant missed earnings estimates for its first quarter and had a tough 2018 for its energy-related products.

The Daily Chart for Chevron

Courtesy of Refinitiv XENITH

The daily chart for Chevron shows that the stock has been above a "golden cross" since March 27, when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices lie ahead. The stock set its 2019 high of $127.34 on April 8 before crude oil, which peaked on April 23. The stock traded back and forth around its 200-day SMA between April 12 and June 4.

Chevron traded as low as $100.22 on Dec. 26, which turned out to be a "key reversal", as the close of $107.39 that day was above the Dec. 24 high of $104.15. This was a signal that 2019 would begin with a tradeable rally. The Dec. 31 close of $108.79 was an important input to my proprietary analytics and its annual risky level remains at $131.43. The close of $124.44 on June 28 was another key input to my analytics. This resulted in semiannual and quarterly risky levels at $131.55 and $137.07, respectively. The close of $123.11 on July 31 was an input to the analytics and its monthly value level for August is $119.01.

The Weekly Chart for Chevron

Courtesy of Refinitiv XENITH

The weekly chart for Chevron will be downgraded to negative if the close on Friday, Aug. 2 is below its five-week modified moving average of $123.34. The stock is above its 200-week simple moving average or "reversion to the mean" at $110.75. The 12x3x3 weekly slow stochastic reading is projected to be 79.81 unchanged from July 26.

Trading Strategy: Buy for the dividend and add to the position on weakness to its monthly value level at $119.01. Reduce holdings on strength to the annual, semiannual and quarterly risky levels at $131.43, $131.55 and $137.07, respectively.

The Daily Chart for Exxon Mobil

Courtesy of Refinitiv XENITH

The daily chart for Exxon Mobil shows the formation of a "death cross" on June 6 when the 50-day simple moving average fell below the 200-day simple moving average to indicate that lower prices lie ahead. The stock set its 2019 high of $83.49 on April 23, the same day as the peak for crude oil. Exxon traded as low as $64.65 on Dec. 26 and the close that day of $68.64 was above the Dec. 24 high of $67.53 confirming a "key reversal." This meant that 2019 would begin with a tradeable rally.

The Dec. 31 close of $68.19 was an important input to my proprietary analytics. The annual risky level at $94.26 remains well above the market. The close of $76.63 on June 28 was another important input to my analytics. This resulted in quarterly and semiannual risky levels at $77.10 and $79.13, respectively. The July 31 close of $74.36 was also an input and resulted in the value level for August at $71.10.

The Weekly Chart for Exxon Mobil

Courtesy of MetaStock Xenith

The weekly chart for Exxon Mobil is neutral with the stock below its five-week modified moving average at $75.47. The stock is below its 200-week simple moving average or "reversion to the mean" at $81.51. The 12x3x3 weekly slow stochastic reading is projected to rise to 46.97 this week up from 46.13 on July 26.

Trading Strategy: Buy for the dividend and add to positions on weakness to its August value level at $71.10 and reduce holdings on strength to quarterly and semiannual risky levels at $77.10 and $79.13, respectively.

How to use my value levels and risky levels:

Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original annual level remains in play. The weekly level changes each week. The monthly changes at the end of each month, the latest on July 31. The quarterly level was changed at the end of June. My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

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https://www.thestreet.com/investing/earnings/buy-chevron-and-exxon-mobil-for-their-generous-dividends-15042191

2019-08-01 17:05:24Z
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