Stock Of The Day: Can Exxon Mobil's Selloff Reverse At Critical Support Zone?

Oil is making a big move lower, with some analysts attributing the decline to Israel’s decision not to target Iranian oil facilities.

As a result, most oil stocks are also trending lower. For Exxon Mobil Corporation XOM, if shares continue to slide, there's a strong likelihood of finding support around the critical $109.50 level—a key support area in both June and September. This is why it’s our Stock of the Day.

In financial markets, price levels that previously acted as support often do so again due to what's known as "seller's remorse."

In Exxon Mobil's case, traders and investors sold their shares around $109.50 in June. When the stock rallied shortly after, some of these sellers regretted their decision and chose to buy back their shares at that same level, reinforcing it as a key area of support.

But they would only do so if they could buy them at the same price they were sold for.

Read Also: Exxon Mobil’s Golden Pass LNG Plant Gets 3-Year Extension Amid Contractor Challenges: Report

As a result, when the stock fell back to $109.50 in September, they placed buy orders. This large concentration of these orders resulted in support forming at the same price that had previously been support.

If Exxon continues to decline, there is a good chance that it finds support once again at the same price for the same reason.

Stocks tend to reverse and rally after they reach a support level. This is also due to investor and trader psychology.

Some of the people who created the support with their buy orders worry. They know that the sellers will go to whoever will pay the highest price for their shares.

They become concerned that other buyers will outbid them. As a result, they increase the prices they are willing to pay. Other concerned buyers see this and do the same thing.

This can result in a bidding war that pushes the stock higher. It happened with Exxon in September, and there is a good chance that it will happen again.

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