Oil and Gas Stocks Outlook for Friday, August 18
Aug 17, 2017 Trading Blog
XOP started the day like a rocket out of the gate and it looked like everyone was on board for an all day ride, but price hit the 29.90 level and got firmly rejected. That was the point where we broke down below the June lows. It is the old concept of support becoming resistance, and it did in a big way this morning. That 29.90 level will be an important point of resistance in the future.
That spike up out of the gate was something that I mentioned for Thursday’s report and a great example of why you don’t short a dull, low volume, ranging market. Also, an example of why trading ‘with the trend’ isn’t always your best choice when you really examine the math of the trade. A short out of the gate this morning would have been a huge killer.
The other problem today was the SPY, it ended the day down about 1.6%, which definitely didn’t help energy stocks. It would have been interesting to see XOP take a shot at the 29.90 level on a day with a strong S&P 500.
I only had one purchase today, which was a long XOP on the close at 29.10. I have been wanting a long energy position for a swing type trade and have planned to scale in over the next couple of days. I got about 10% of my total position on the close and will pick up another 10% on any big gap down open on Friday.
I also continued to watch ECR today, but I am being really patient with this name waiting for it to get under 2 before I take my shot. There was some early selling, but it actually held up pretty well until the last 45 minutes when everything was getting sold off. I will be ready on the open tomorrow with buy orders for that one around 2. I will be leaving myself plenty of room to add to the position if it decides to get really crazy and test the lows around the 1.60 level. We could only hope for a golden opportunity like that.
There weren’t too many areas of strength today, but the natural gas stocks did better than most and a couple of the services names were green including NOV and NBR. NBL, APA, MRO, HES were all down greater than 2%. There wasn’t any clear pattern of anything specific being sold off, just a general, orderly decline in everything.
Outlook for Friday: After a 1.6% SPY drop and 1.5% XOP drop, with both closing on the lows, the obvious outlook is a gap down and more losses. As I wrote up on Wednesday night, we are in a huge liquidity gap right now that extends all the way down to about 25. I worry that if things really get ugly in the overall market that there could be a total overreaction in the hated sector of energy with everything just getting tossed in the trash. That is a great thing if you have a wish list of stocks you want to buy, not so good if you are already in long. Get those wish lists ready.
Trading Plan for Friday: My entire plan is to focus on ECR and XOP and buy on any big gap down and then do nothing. Seriously. That’s the whole plan LOL. If we somehow open green, I will be sitting on the sideline watching for a decline. I really doubt the market will offer me a high odds long on Friday morning. It is one of those days where caution is the best play. Sometimes watching and learning is much better than taking a trade just for the sake of trading.