Chart of the Day – $AAPL vs. $XOM for Talking Numbers

Here’s a preview of what I’ll be discussing on Talking Numbers today between 3:20 and 3:30 pm EST on CNBC:

With AAPL making new 52 week lows today, XOM has actually surpassed it as the stock with the largest market capitalization in the stock market. That seemed unthinkable just 4 months ago, but AAPL’s descent has been swift and steep.

Based on the charts, which stock would I prefer to buy here?

This is a 2 year chart of AAPL:

AAPL 2 year chart, Courtesy of Bloomberg

The 425 area served as resistance in the fall of 2011, and when AAPL finally broke above that area at the start of 2012, it was off to the races. The parabolic advance turned out to be an unhealthy, unsustainable rally. However, after the steep selloff we’ve seen over the last 4 months, the stock is finally close to longer-term support, so a long entry is a lower risk proposition than it has been in the past year.

One additional piece of evidence in favor of AAPL starting its bottoming process is the improving momentum even as the stock has made subsequent new lows. Here is the same 2 year chart with the bottom panel showing the RSI (Relative Strength Index), as a measure of recent momentum:

AAPL 2 year chart with RSI, Courtesy of Bloomberg

I’ve drawn with a red arrow the improvement in the momentum despite the stock making much lower lows from the November low around 505. The selling might be close to exhaustion, and right near important support.

In contrast, XOM is near long-term resistance, going all the way back to 2007 and 2008. Here is the 7 year chart:

XOM 7 year weekly chart, Courtesy of Bloomberg

The 92.50 to 95 area acted as resistance as the stock topped out in 2007-08, and it has acted as resistance over the past few months once again.

The risk/reward for a long entry on XOM here is not favorable given that technical backdrop.