6 years hoping for no price spikes? I sure hope you don't really play the markets with real money
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XOM $400B to Zero
- Thread starter TheTalkingMule
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I follow your logic. I think the part I would challenge you is "minus demand growth (from population growth)."
Demand growth isn't tied to population growth, but it's more about the number of people crossing the per-capita income level at which their energy demand starts increasing exponentially (s-curve). This number was stable at ~700m for many years, but it's starting to multiply (think India and other lower-to-mid income countries).
Here's a little Elliot Wave Analysis for XOM:
So to start, XOM followed a pretty perfect Motive Cycle with a 5 wave pattern as above. Wave 2 did not correct all of wave 1. Wave 3 was the longest. Wave 4 trough is higher than wave 1. Wave 5 Peaked in July 2014 at 104.76. Since then it has been in the Corrective Waves. The question is Which corrective wave? Three main types: Zigzag, Flat or Triangles.
Zigzag is the classic ABC pattern where it just goes down, and wave C is the lowest. This needs a 5-3-5 pattern of subwaves to confirm. Wave B peak will be below Wave 5 peak. If this is a zigzag, then the current SP will drop to a price point formed by a lower channel price paralleling a line drawn from Wave 5 to Wave B.
Flat, as the name implies, is a flat cycle of waves, and usually Wave B is equal to Wave 5 (start of wave A) or higher. So we can rule out a Flat pattern of corrective waves at this point (Wave B peak is lower than Wave 5).
Triangle has 5 waves with a subwave pattern of 3-3-3-3-3. This has three subtypes, Contracting, Barrier, and Expanding Triangles. Of these, Wave B will only be lower than Wave 5 in a contracting triangle. A Barrier triangle in a bull cycle will have a Wave B = Wave 5, and an expanding triangle will have Wave B > Wave 5. So we can focus on the possibility of a Contracting triangle.
So we need to figure out if the corrective wave pattern we are seeing for XOM is a Zigzag or Contracting Triangle.
So to start, XOM followed a pretty perfect Motive Cycle with a 5 wave pattern as above. Wave 2 did not correct all of wave 1. Wave 3 was the longest. Wave 4 trough is higher than wave 1. Wave 5 Peaked in July 2014 at 104.76. Since then it has been in the Corrective Waves. The question is Which corrective wave? Three main types: Zigzag, Flat or Triangles.
Zigzag is the classic ABC pattern where it just goes down, and wave C is the lowest. This needs a 5-3-5 pattern of subwaves to confirm. Wave B peak will be below Wave 5 peak. If this is a zigzag, then the current SP will drop to a price point formed by a lower channel price paralleling a line drawn from Wave 5 to Wave B.
Flat, as the name implies, is a flat cycle of waves, and usually Wave B is equal to Wave 5 (start of wave A) or higher. So we can rule out a Flat pattern of corrective waves at this point (Wave B peak is lower than Wave 5).
Triangle has 5 waves with a subwave pattern of 3-3-3-3-3. This has three subtypes, Contracting, Barrier, and Expanding Triangles. Of these, Wave B will only be lower than Wave 5 in a contracting triangle. A Barrier triangle in a bull cycle will have a Wave B = Wave 5, and an expanding triangle will have Wave B > Wave 5. So we can focus on the possibility of a Contracting triangle.
So we need to figure out if the corrective wave pattern we are seeing for XOM is a Zigzag or Contracting Triangle.
Here would be a chart of a Zigzag pattern for XOM with the channel lines added. If it is a Zigzag, then the current SP should drop significantly, talking sub 50s!
However, a zigzag pattern Needs to have a 5-3-5 subwave pattern. So I have drawn in a possible 5 subwave pattern to the trough of W-A. As we can all see, using the rules, Wave 4 Violates the rule that it can Never be in the range of Wave 1. Thus it eliminates the possibility that XOM corrective pattern is a Zigzag pattern.
This leaves the Contracting Triangle:
Also, temporally Wave 5 to Wave A, and Wave B to Wave C are usually around the same length. Guess what, W5 to WA is approximately 1 year (7/2014 to 8/2015). WB to WC is approximately 1 year as well..so far (7/2016 to 8/2017).
Bottom line, from a wave analysis standpoint, I believe XOM is coming to the end of its current down cycle and will inflect back up. However, the next peak Wave D will be less than 95.55 (peak of Wave B), likely max up to 90. Then there will be another down cycle to a Wave E trough. This is usually a higher trough than Wave C. Afterwards, not sure.
If the temporal cycles hold, we could be looking at another 2-3 years of the corrective cycle, before possibly entering back into Motive waves... or starting another corrective wave.
However, a zigzag pattern Needs to have a 5-3-5 subwave pattern. So I have drawn in a possible 5 subwave pattern to the trough of W-A. As we can all see, using the rules, Wave 4 Violates the rule that it can Never be in the range of Wave 1. Thus it eliminates the possibility that XOM corrective pattern is a Zigzag pattern.
This leaves the Contracting Triangle:
Also, temporally Wave 5 to Wave A, and Wave B to Wave C are usually around the same length. Guess what, W5 to WA is approximately 1 year (7/2014 to 8/2015). WB to WC is approximately 1 year as well..so far (7/2016 to 8/2017).
Bottom line, from a wave analysis standpoint, I believe XOM is coming to the end of its current down cycle and will inflect back up. However, the next peak Wave D will be less than 95.55 (peak of Wave B), likely max up to 90. Then there will be another down cycle to a Wave E trough. This is usually a higher trough than Wave C. Afterwards, not sure.
If the temporal cycles hold, we could be looking at another 2-3 years of the corrective cycle, before possibly entering back into Motive waves... or starting another corrective wave.
Ok, considering current price action on XOM, really tempted to play this stock... Looks like it has hit it's trough for this part of the wave. Hope no one shorted even if not for the Elliot Wave reasons I pointed out.
We all have to remember that XOM has a short interest of less than 1% (less than AAPL). So theoretically this is a more pure Elliot Wave play. So my prediction is that it will top for now around high 80's to low 90's or so, but it will take a while.
We all have to remember that XOM has a short interest of less than 1% (less than AAPL). So theoretically this is a more pure Elliot Wave play. So my prediction is that it will top for now around high 80's to low 90's or so, but it will take a while.
jhm
Well-Known Member
We need to break this down. Oil companies can be profitable whether demand is rising or falling, unless perhaps falling faster than about 6%/y. The peak is simply the point at which demand ceases to grow, and at this point oil can be profitable or unprofitable. The critical issue for a company like Exxon is not the volume of demand, but simply the price of oil. Oil companies become unprofitable when the price of oil is too low.
So what we need is an analysis of oil price evolution and Exxon's ability to tolerate low prices. At what price of oil over an extended time is Exxon at risk of bankruptcy? I don't know the Exxon well enough to say, let's call it $X. So now, what sort of disruption could push the price of oil below $X?
I recommend considering the impact of heavy EVs on diesel. Let's say that Tesla Semi and other EV semi makers are able to get to a parity price with wholesale diesel at $1/gal or retail about $1.85/gal. This puts price pressure on diesel down to $1/gal. Modeling the price sensitivity of crude to diesel, this is comparable to pushing crude down to $35/b. Maybe this is below $X. With this sort of price pressure in play, the oil industry has a conundrum: it can cut production and maintain profitability or it can cut prices and maintain "demand growth". Whether demand grows to 2025 or 2045 pretty much depends on how low the industry is willing to cut prices. At least, OPEC is forthright about their willingness to cut production to preserve prices in the $40s. Maybe all oil majors will join them. So it is plausible that price of oil could remain in orbit of $50/b for the rest of eternity. But if that is the chosen path, it is also true that Tesla Semi and others can undercut diesel and gasoline prices enough to grow EV fleets as fast as they can be built. Either way, you've got a situation where revenue for the total transport fuel market is shrinking year after year. Such a situation make it hard for all but a few super low cost producers to survive. It will become increasingly hard for a large player like Exxon to sustain profit growth even if oil prices remain sufficiently high. And for this, shareholders will be disappointed even if Exxon survives.
jhm
Well-Known Member
US shale oil and gas investors are on a 'road to ruin,' warns renowned short seller Jim Chanos
Well, well, look at who Jim Chanos is shorting now.
Well, well, look at who Jim Chanos is shorting now.
Well, the EWs on XOM was too tempting back then. So got in XOM, until now. Sold at my price target around 89 as predicted by the EWs. Got too greedy for a bit and pushed it for bit to 90, but brought it back down to 89 and sold. Good thing, just before the drop.
Anyhow, so what now? Is it a good time to short XOM? Using the contracting triangle corrective cycle premise I re-evaluated XOM to get a sense of what the predicted covering price would be:
This would imply that the price bottom for XOM would be around 79-80. Current SP is 84.53. Hardly seems worth it to short. Short term puts maybe...
That being said, if XOM hits 79-80, that would imply that this corrective cycle will be played out. At that point it may enter a new Motive cycle (up waves 1-5) or enter another corrective cycle.
The interesting thing is I had predicted that the peak would be a little later in the year (I had assumed April). Obviously I can be totally wrong and the SP may take a huge bounce up Monday, but given the macros and general sentiment, I suspect that won’t happen.
My WAG based on my interpretation of EWs.
BTW this is the monthly chart.
Anyhow, so what now? Is it a good time to short XOM? Using the contracting triangle corrective cycle premise I re-evaluated XOM to get a sense of what the predicted covering price would be:
This would imply that the price bottom for XOM would be around 79-80. Current SP is 84.53. Hardly seems worth it to short. Short term puts maybe...
That being said, if XOM hits 79-80, that would imply that this corrective cycle will be played out. At that point it may enter a new Motive cycle (up waves 1-5) or enter another corrective cycle.
The interesting thing is I had predicted that the peak would be a little later in the year (I had assumed April). Obviously I can be totally wrong and the SP may take a huge bounce up Monday, but given the macros and general sentiment, I suspect that won’t happen.
My WAG based on my interpretation of EWs.
BTW this is the monthly chart.
XOM was @ $78 when this thread started, or ~$330B market cap.
TSLA was @ $352, or ~$68B market cap.
Today we're at $178B vs. $141B
Who wants to bet on the date when XOM market cap is overtaken by TSLA? My guess would be May 14th, 2020.
TSLA was @ $352, or ~$68B market cap.
Today we're at $178B vs. $141B
Who wants to bet on the date when XOM market cap is overtaken by TSLA? My guess would be May 14th, 2020.
TSLA has now easy passed the XOM lows of Mar/Apr, but oil has recovered and XOM stands at $218B market cap(up $40B+).
TSLA @ $1000 is $186B market cap, just sitting there and waiting for oil to pull back from this run up should do it.
I'm gonna predict TSLA passes XOM on the first day of trading after the 4th of July. Viva Independence!
TSLA @ $1000 is $186B market cap, just sitting there and waiting for oil to pull back from this run up should do it.
I'm gonna predict TSLA passes XOM on the first day of trading after the 4th of July. Viva Independence!
Update 8/20/2020.....
XOM market cap $176B
TSLA market cap $372B
We have officially lapped ExxonMobil.
XOM market cap $176B
TSLA market cap $372B
We have officially lapped ExxonMobil.
