Oil and Gas Stocks Outlook and Trading Plan for Tuesday, August 22
Aug 21, 2017 Trading Blog
It was an absolutely boring day on Monday. The normal daily ATR on the XOP over the last 14 days is about 76 cents, today’s range was 41 cents, or about half the average day. The average volume over the last 10 days is 14.4 million, today we did 11.3 million. So no range and no volume. The only positive out of that combination is that we possibly have some type of equilibrium situation from which to produce some volatility.
The bright spot Monday was the UNG and COG in the natural gas area. The biggest losers on my screen were NFX (-3.2%) and PXD (-3.1%). I’m not a fan of either of those stocks right now. I did manage to pick up some APA at 39.31 to add to my existing position. Apache ended the day at 39.52, so I got lucky on that one, at least for now.
Tuesday’s Outlook: We were a couple of pennies away from an inside day from Friday’s range, taking out the downside by 2 cents. Friday was also nearly an inside day from Thursday’s range. What we seem to have is a tightening or consolidation with decreasing volatility, which could possibly lead to an explosion one way or the other. The overall trend is still down, so the odds are that this breaks downward, especially if any volume comes back to the market. The only positive is that the volume has been light, as there doesn’t seem to be any active sellers, but rather a slow drift down with nobody really wanting to step in and stop the fall. The slope of all the moving averages continues to steepen and the 8 and 50 day ma’s are diverging fast, which indicates a strengthening of the downtrend. As stated before, we are still in a liquidity gap that extends down toward 25.
Tuesday’s Trading Plan: Many times my trading plan doesn’t really correspond with my daily outlook above. Sometimes the math suggests that going against the trend is the better play. Tuesday is likely one of those days. I am looking for a move down to test that low from Friday/Monday of 28.96-28.98 on heavy volume to see if we have any big buyers step up at that level. If they show, I’ll be looking for a second low volume test into that area to get long and use the lows as my stop. The basic premise here is that larger buyers will put support under the market and the sellers have exhausted in the short term. This is where some really sharp, fast upmoves can occur, much like we saw Thursday morning on the open and Friday mid-morning.
Individual Stocks: I have probably missed ECR. Today was the perfect chance for it to drop to that 2.00 area, but it looked like someone stepped in and supported it all day, accumulating anything that was being sold. It is out of my range now at 2.20, will move it to the back burner for now. APA is still attractive and I will continue to monitor and add to that position. Also looking to pickup PE and DVN on any 2-3% drops. HAL is also dropping back into the buy range, closing at 38.74 Monday. I’d be interested if it dropped under 38. At some point EOG will also get interesting, but I’m being patient on that one looking for sub 80.00. I usually don’t play too many refiners, but MPC is looking like a great swing trade candidate for an oversold bounce. Oil isn’t really going anywhere, so there isn’t sufficient reason for a drop from 56 to 49 on that one.