Update: Exxon Mobil Corporation (XOM) vs. Chevron Corp. (CVX)

Two weeks ago I highlighted the “white elephant” spread long $XOM and short $CVX setting up for a nice positional trade.  Two weeks later, the spread hasn’t moved.  From a pure statistical standpoint this is still a decent long-term setup — but, if you’re trading this in the medium-term, it’s make or break time.

$XOM just announced a strategic deal with Russian oil company OAO Rosneft.  This is your catalyst.  This is the excuse for $XOM to rally.  If the spread doesn’t move with a catalyst, it probably won’t move much at all, especially not in the direction you want.

This spread typically takes 15 trading sessions to complete a medium-term cycle, and 31 sessions to complete a long-term trading cycle.  There’s an opportunity cost to being in a trade like this.  If you are going for the long-term cycle you need to have a plan to hold the capital until the third or fourth week in September.  At 15 days and counting this trade is clearly getting long in the tooth in the medium-term.  The spread is also just not acting right.  So, tighten up your stop out point and if the spread doesn’t start moving in your direction soon, it’s time to cut or reduce the position size.

Read:

Rosneft, Exxon Announce $3.2 Billion Exploration Deal (WSJ)

Trade Idea: Exxon Mobil Corporation (XOM) vs. Chevron Corp. (CVX) (DynamicHedge)


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