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With oil prices continuing to rise this year, investors have been hopping on board the Big Oil train. And Exxon stock is leading the way.
Exxon Mobil Corp. (NYSE: XOM) has attracted strong attention in recent weeks. Since the stock sold off when climate change activists won seats on the board, Exxon shares have recovered nicely.
While we do not want to downplay the role of activists on the future of the company over the long run, in the short run the activists don't have enough votes to effect policy change at Exxon. Nine other directors who are familiar with the oil and gas business are also on the board of the oil and gas giant.
Exxon has made it clear that it is in the carbon fuel business and intends to stay in it for a long time.
And with oil prices climbing nearly 50% higher on the year, Exxon is a clear winner. Exxon stock has followed oil prices, gaining 46% on the year.
But investors aren't interested in whether Exxon was a good stock to buy at the start of the year. You want to know if Exxon stock is a great buy today.
Here's your answer...
Exxon Mobil Is a Great Trading Opportunity
Buying Exxon is a bet that oil prices keep moving higher for the rest of 2021. If you think oil and gas prices can continue to climb as the global economy reopens then Exxon is a smart play.
In fact, some analysts forecast oil prices could hit $100 a barrel next year.
There are plenty of reasons for an extended climb in energy prices. There is enormous pent-up demand that will outpace supply. Asia and Europe are running behind the United States in vaccination rates and reopening timelines, which means even more demand for energy is coming as these countries catch up.
20 Best 5G Stocks to Buy Now
Forget AT&T, T-Mobile, or Verizon. The real returns in 2021 and beyond will come from this backdoor 5G market.
20 Best 5G Stocks to Buy Now
Forget AT&T, T-Mobile, or Verizon. The real returns in 2021 and beyond will come from this backdoor 5G market.
That in turn will help lift shares of Exxon stock higher.
Another driver of higher oil prices is coming from a global push to limit oil exploration and expansion to meet climate change goals. Cutting back on exploration as demand begins to swell could be a recipe that creates a price spike back to the level of $100 a barrel of oil.
While there were concerns about Exxon's dividend in 2020, a cutback in its aggressive spending plans has increased the safety of the payout for now. At current prices, the dividend offers an attractive 5.5% yield.
That dividend offers some nice stability for shareholders.
While there are a lot of factors that make XOM a solid buy right now, it's also not a "set it and forget it" stock.
How to Make the Most of Exxon Stock
We suggest using a tight trailing stop to ride any oil-driven momentum in shares of Exxon Mobil. The wild card in oil prices is the current argument among OPEC members about production increases. Right now, OPEC and Russia are keeping a lid on their oil output, but should the cartel fail to agree on a plan, we could see several OPEC countries turn on the pumps and start brining enough oil to market to force prices down.
Several nations including the United States and India have been pushing OPEC to take steps to increase production and push prices lower before it can impact the global economy in a negative way.
Should we see production increases, the price of oil, and Exxon Mobil, could slump quickly.
The fact that commodity traders are massively long on oil could also eventually be a problem for oil prices and shares of Exxon. Money mangers are long about eight times as many contracts as they are short right now and if they began to sell it could put additional pressure on oil prices.
A stop at around the minor support level of $55 would be a wise move for those looking to play a potential move to the 2020 highs above $80 in the stock. $100 barrel oil could be the catalyst to get us there, and that would mean a 45% gain in the share price.
For long-term investors, history suggests that buying shares of Exxon as oil is making new highs has not been a wildly successful investing strategy. Exxon is the ultimate commodity stock, and the time to buy commodity stocks is when nobody wants to buy them and commodity prices are low.
A look at the long-term chart of Exxon suggests that the ideal time to make long-term purchases of Exxon Mobil shares is when stock prices have been falling and oil is trading for less than $40 a barrel. These opportunities do not come along often, but when these circumstances occur, it is usually an excellent entry point for a long-term position in the stock.
20 Best 5G Stocks to Buy Now
Most people searching for "best 5G stocks to buy" will end up investing in AT&T, T-Mobile, or Verizon.
And they'll be in for a rude awakening, because profits from investing in 5G directly are almost completely dried up.
Instead, Tech Investing Specialist Michael Robinson is revealing why the real returns in 2021 and beyond will come from this backdoor 5G market.
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Our Chief Investment Strategist Shah Gilani's got four solid "Buys" you're not going to want to miss out on.
