Stock Of The Day: Is Exxon A Way To Profit From Higher Oil Prices?

Political tensions and potential war in the Middle East have made the price of oil rip higher. This means there are opportunities to profit by investing or trading in the companies in the energy sector.

As you can see on the chart, shares of Exxon Mobil Corporation XOM may be about to break out. This means they may be about to move above what has been a resistance level and trend higher. This is why we have made it our Stock of the Day.

Traders use the term ‘breakout' frequently. It refers to an important market dynamic that savvy traders can use to profit.

Read Also: Port Strike Enters Day 3: Economist Warns Of ‘Meaningful’ Impact If Standoff Prolongs, Food & Beverages Likely First To Feel The Pinch

The stock market moves when it is out of equilibrium.

If there isn't enough supply, or sell orders, to fill all of the demand, or buy orders, the market will trend higher. This happens because the traders and investors who want to buy will be forced to increase the price that they are willing to pay to draw the sellers into the market.

When a stock reaches a resistance level, the tide turns. Resistance is a large group or concentration of sellers. At resistance levels, buyers can obtain all the shares they need without pushing the price up. Because of this, rallies can end or stall out at resistance levels.

If a stock eventually trades and holds above what had been a resistance level, it is called a ‘breakout'.

This illustrates an important market principle. It could be an indication that the traders and investors who created the resistance with their sell orders are gone. They have either finished or canceled their orders.

It can result in the market being out of equilibrium once again. So, to get sellers interested, the people who wish to buy must be willing to bid or pay higher prices. It can force the market into a new uptrend.

The best traders let the market tell them what to do. If a breakout occurs, which may be about to happen with Exxon, the market is saying an upward move in the price is going to take place.

Read Next:

• GE and Howmet Poised for Strong Earnings as Aerospace Sector Stays Resilient: Analyst

Image: Shutterstock