Volatility Compression

Volatility compression is a situation where prices stay within a narrow range between the all-time high and a year-long uptrend. When prices approach the previous high, profit-taking can happen. However, a true breakout requires not just touching the $126.34 mark but maintaining it. If $XOM stays below this high and then breaks through, it could lead to a significant price increase. On the other hand, if it doesn’t hold, it may result in a “double top,” pushing the price down to $115. The next price movements will show whether Exxon’s 2024 peak was a false alarm or a stepping stone for future growth. Pay attention to the daily closing prices for clues. Today, January 12th, 2026, we are closely observing Exxon Mobil as it approaches the critical all-time high of $126.34. This tense situation arises as West Texas Intermediate (WTI) crude oil prices remain steady around $88 per barrel at the start of the year. This strong energy market sets the stage for a potential breakout. For those looking for a “blue sky breakout,” buying out-of-the-money call options for February or March 2026 is a straightforward way to capitalize on this potential move. If the stock breaks and holds above $126.34 with high volume, it would indicate that the stock is entering new territory with no previous resistance. This strategy allows traders to profit from a quick move while managing their risk.

Directionally Agnostic Strategy

Recent data from the options market supports this positive outlook. Open interest for the February $130 strike calls has increased by nearly 25% in the past week, suggesting more traders believe the stock will not only surpass its old high but continue rising. The support level built in 2025 indicates that buyers are becoming more active at higher prices. However, the risk of a “double top” failure, like what occurred in late 2024, is significant. If the stock reaches $126 and then faces heavy selling, traders could use put options to profit from a downturn to the $115 support area. Monitoring the daily closing price is crucial; a close well below the high after touching it would indicate a bearish trend. With prices compressed between rising support and flat resistance, a significant move is expected soon. Traders who do not have a specific direction but anticipate increased volatility might consider a long straddle by purchasing both a call and a put option at the current price. This approach can generate profits if the stock moves significantly in either direction, which often happens when a year’s trend resolves. We should remember what happened in the fourth quarter of 2024 when the stock sharply dropped from this same peak. This past event is why some traders are buying protective puts while still holding shares, providing a safeguard against another sudden decline. The memory of that drop contributes to the current resistance. The key catalyst to watch will be the company’s fourth-quarter 2025 earnings release, expected in the last week of January. A strong earnings report and positive outlook for 2026 could provide the necessary boost to finally break through the $126.34 barrier. Conversely, any signs of weakness in that report could confirm the resistance and trigger a bearish scenario. Create your live VT Markets account and start trading now.

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