Trading Plan for Tuesday, March 12, 2019
Mar 12, 2019 Trading Blog
SPY – I completely missed it Monday and wasn’t expecting that kind of upmove at all. The momentum could continue Tuesday. The 200 day ma sitting around 275, combined with Monday’s low of 275.23 should make a very well defined stop for any long trade. If you want a tighter stop, you can use the 8 and 20 day ma’s at 277.65 and 277.15 respectively. Yesterday’s VWAP fell right between those ma’s at 277.56. If the market breaks all of those points convincingly to the downside, then get out. It feels like the market wants to make a quick run right back to the top of the range around 282. Once we get there, the question is do we break out OR do we create a upthrust trap and then rip straight down. Anyone who got short has their stop sitting just over last week’s high. They are sitting ducks at this point begging to be attacked. I’m not interested in trying to play SPY, just too much volatility for me at this level. It’s just a leading indicator for me.
Oil – 6amET Oil at $57.34. Oil followed through on the big hammer candle created on Friday and it’s possibly forming a nice base here to break out over 58. That hammer on Friday showed that there is significant demand in the 55 area, so keep an eye on that level as a stop. As oil heads toward the top of the range, also watch for a possible Trump tweet. He seems to take a shot at oil anytime it gets strong. Also, keep an eye on the EURO, it could be making a longer term reversal after failing to break to the downside out of the range that has been forming since last summer. The spot to watch there is ~1.14 on the upside and 1.1175 on the downside.
XLE – Last week’s Norway Wealth Fund liquidation sure faded quietly into the background didn’t it? It was just the latest flavor of the day and never an issue to begin with, as it was old news which began in late 2017. The Twitter effect was in full force on that piece of “news”. A few people tweet about it, everyone mindlessly retweets and the snowball grows, whether it was correct or not. All of those positions have likely been hedged and I wouldn’t be surprised if they have already lined up block buyers for a majority of dispositions at previously agreed to prices. If you got short on that news, Monday’s action is a great reminder to be careful following the herd.
The XLE bounced off the 50 day ma on the February 8th low and bounced off the 50 day ma again this past Friday for another low point. Monday’s action closed the Thursday-Friday gap and managed to hold Thursday’s range, which is a fairly strong move. Much like the SPY, there are probably stops sitting up around 67 that could get attacked. I’m watching the 8 day ma at 65.35 and 20 day ma at 65.41. Those two ma’s are sitting right together, so that’s going to be significant resistance. I’m not really interested in shorting the XLE. The big four (XOM, CVX, BP, RDSA) have all been very strong and I’m not going against them, although XOM does look vulnerable around 80. If I’m going to short, I’m going to attack the weak link, which is the XOP.
XOP – The XOP is lagging both the SPY and XLE. It managed to take out Friday’s highs, but just barely, and it didn’t come anywhere near closing that Thursday-Friday gap like the XLE did. I’m looking for the E&P’s to get carried up to the 29.50-30 level, mostly on the strength of the SPY. As the XOP moves up, I’ll be looking for a spot to get short. The first level of resistance for Tuesday is 28.96. The next level of resistance is the 8 day ma at 29.50, then the 20 day ma at 30. I’m looking to use the area between those ma’s as my stop on a short, playing for a run back down to 28. The first area of demand is 28.46-28.55.
Top Swing Trade Setups:
EOG – I’m looking for demand to show up around 85 for an attempt long using the Christmas lows as my stop.
COP – Demand has shown up around 65 for most of 2019. Friday bottomed out at 64.91 and Monday’s action held 65.34 and created an inside day based on Friday’s action. I’ll be looking for an early test of that 65.34 low and will use 64.91 as my stop for a long attempt.
MPC / VLO – The refiners bounced off daily chart support Monday and both MPC and VLO finished at the highs of the day. MPC held the 58.85 level most of the day on Monday and that makes a good stop to try and play long for a continued run up. HFC also has significant support on the daily chart for a possible long play.
HAL – I don’t think this is going to get into a buy zone Tuesday, but I’m watching the 25 level in the next few days for a long attempt. With all the XOM and CVX money that’s supposed to be flowing into Permian production, HAL should get a bigger boost than SLB since they are more focused on North America.
RRC / EQT – In the natural gas space, both of these stocks are very close to support on the daily chart. EQT has formed the larger base, but RRC is probably my preferred choice for a long using 9.25 as my stop. Both of these stocks have very well defined stops and good potential for profits making the risk vs. reward very favorable.
Small/Mid Permians – I’m in CDEV right now and losing with it. I was too early. My trade theme here is to place trades on PE, MTDR, JAG and CDEV to cover the four best bets to get bought out in the coming months. I’m guessing that RDS.A is probably the most likely buyer of a smaller Permian. I’d like to see PE get closer to 16, MTDR closer to 15 and JAG closer to 8.50.
In other news, I’m completely sick of hearing about Brexit. I finally took the final step and muted the word on my Twitter timeline (along with bitcoin, Kashoggi and Mueller). Brexit is like that crazy drama girlfriend who threatens a breakup for months (and in Brexit’s case – years) and never seems to have the guts to follow through. Just be done with it and move on.