Don't invest in the old companies

I have lived my entire life in the 'wake' of the baby boomers. Unfortunately for me, the entire economy will flip in favor of the boomers to the millinials and younger, skipping over Generation X. Companies, like Exxon (old industry), Oracle (old tech), are not a good bet on the future. For example, we have seen peak demand for gas in 2019 in our lifetime. Electric cars or hybrids are here to stay. The costs make it cheaper than a normal gas car. In 2020 Exxon wrote down 20 billion dollars, and slashing spending to lowest level in 15 years.  In November 2020, analysts say that Exxon requires to increase debt by 8 billion to pay dividends in 2021.

The combination of looking at future growth, combined with current expectations required to be a favorable stock (dividends) makes Exxon a low probability of successful valuations.

The last year has been one of buying on emotion, not value, and Exxon is one of these stocks.

But lets assume I am wrong, as you always should do.  What else can we do to confirm my theory?

One way is to use price charts, look for a key level that will indicate the stock is declining and is likely to have additional declines.

Below are two charts, first is the MACRO view, why certain price points have meeting from a historic view.  The second chart is the close up view of the near-term price action price points to watch.

Above shows clearly there is good support for Exxon stock at about $31 dollars, if the stock falls to this level it is more likely to rebound than fail.  However if it breaks down to $29 for more than 1 day, I would expect the stock to move to 10-15 over time rather than 45.   Meaning it is more likely to  lose 50% of value than gain 50% in value.

Conversely the price Exxon is at right now is at the level of being bullish.  If it can break above this level for a few days and hold it, I'd expect it to rise to the purple line.  The purple line would be the next test for being bullish to make a run to new highs.

Lastly, the purple lines represent a 'channel', and this is the price area it is expected to trade in. 

Bottom line, a break DOWN below the first green dashed line should be a signal to sell ASAP, a break below the purple line is also of great concern as it shows accelerating price decline than history has shown.

A break above the upper purple line is quite bullish, and a new high is potentially ahead.

So there you have it, two ways to look at Exxon stock, future prospects, less gas purchases, debt spending to pay dividends.  Exxon used to give dividends out due to great profits over its 135 years, now it gives dividends by borrowing money.  Its not a net cash company, something has changed, my guess is gas is becoming less profitable.

The other way is to ignore the big picture and look at price, and know what is good and bad for Exxon.  This logic can be applied to any long term buy and hold, especially for older companies.

In general, look forward for growth sectors to invest in, not sectors that are shrinking.  At least the MACRO view will help increase likelihood of success.

Good luck!

One final look at Exxon, in the past week.

Exxon did BREAK above the red line for 20 days, Monday we will see if it can bounce off the red line.  If it does that is bullish, next move to purple line.  If breaks down, its a failure and I expect further declines.  Notice the two moving averages (red/green lines) the red line is above the green, that indicates more down to come.