Oil and Gas Stocks Outlook for Wednesday, August 16
Aug 15, 2017 Trading Blog
Tuesday started out perfectly and I really thought I was going to have a big day, but things just fizzled out around 11 am and the day turned into a disappointment. Everything was going according to Tuesday’s Trading Plan and Outlook, starting with a red open and a quick move straight down to the lows in the first 20 minutes. They went straight for the stops under the 29.90 lows and after the first hour we had already traded about 6 million shares, which is huge volume. We got a high volume low and then the low volume retest and I was ready to add long for a huge bounce, and then… NOTHING.
The larger players scooped up every stop under 29.90 and put them all in their pocket and then just sat there, content to just accumulate any other selling. Problem was, there just wasn’t any selling other than the stop orders getting executed. Once those were done, so was my day. We did get a pop when the lunchtime crowd returned about 1:30 which got me in the green, but I got the feeling that small run was simply guys who incorrectly chased the break of the lows and were covering their shorts. The last two hours was just a directionless drift sideways and I cut most of my position at the close.
So was today a total waste or is there anything valuable to be gained from the action? The most important thing to know is that all the liquidity under the market is gone. There probably aren’t any stops left under there and that liquidity is going to have to be allowed to rebuild, which means we probably drift in the accumulation range for awhile. Second, they shook it as hard as they could and nothing happened, no panic whatsoever today and very few sellers around. If we consider the break of the lows as a test to see what bears are left, then we found out that there aren’t many left at all. If there isn’t much selling pressure, then the line of least resistance may be up from here, at least to the top of the range around 34.
Wednesday’s Outlook: Given that we broke to new lows and there was no real selling volume and no panic, I expect that the smart money can do one of two things. First, they could simply let this thing die of boredom and drift lower on light volume, accumulating their shares as it ranges. Second, if they decide to move it up, they could do so very quickly since there isn’t much aggressive selling and supply overhead. It all depends on whether everyone has the full positions they want. I get the feeling that they probably aren’t ready to push it out of this accumulation range of 30-33, and if it does approach the top of the range again in the coming weeks, odds are high that it is another bull trap, but we won’t know until we get back up there. Other than those two courses of action, nothing else really seems like a high odds hypothetical.
Wednesday’s Trading Plan: The best play for Wednesday is going to be a low volume retest of the 29.75 area to try a long against a stop of the lows. The other area to watch is the 29.90 point where we broke down today. Whether price is above or below that line will tell a lot about the strength of this market. If a position is taken long down at the lows, then the perfect spot to add is a break above the 29.90-30.00 level.
We got the API number at 4:30 and it was a 9.2 million draw, but XOP hasn’t moved at all after hours. This is very strange, as it should probably be up near 30.25 on that big of a draw. We get EIA at 10:30 Wednesday, so I doubt I’m going to be taking any large position ahead of that. The ideal situation would be a disappointing number and a sharp dip, which I would buy in a second.
Individual Stocks: RRC was the strongest stock on my board today. It has been crushed over the last couple weeks and it is hard to tell if this is just a dead cat bounce, but it looks like it might be more, especially with the other nat gas stocks firm. Keep an eye on that one long. Speaking of nat gas, I had ECR on watch all day for an entry long, but I never got a clear shot. I’ve got a limit buy at 2.26 and orders stacked all the way down to 1.90. APA, DVN and PE are also possible longs on any big drop.