Trading Plan for Thursday, March 14, 2019
Mar 14, 2019 Trading Blog
Today is decision day for the XOP. On Sunday I posted my plan for the week and the 30 level is where I had the market running into big supply. The E&P’s hit 30.16 on a spike after the EIA number and then consolidated the rest of the day closing at 30.01. Thursday we either get that rejection at supply or we get a run to 31. Let the market tell you what to do, this isn’t a spot to simply try to be early by guessing which way the market will go. Energy could still break your heart and turn down sharply if the overall market fails up here at the top of the range after a possible upthrust pattern yesterday.
6:45ET Complicating things a bit, I now see Trump/Xi have delayed trade talks into April. Not a huge negative, but not very helpful for today.
SPY – SPY made it to the 282 level I was looking for, topping out at 282.38. Wednesday’s high and low will be Thursday’s most important price points. First glance at the daily chart suggests that Wednesday’s action could have been a stop hunt and upthrust. I do not want to see the market take out Wednesday’s low, as that could be a disaster. We closed last week at 274.49, which is quite a run so far. If price tries to break out above 282.38 and fails, there could be a pretty good pullback, possibly all the way back to 278 or even the 200 ma at 275. Things looked very strong Wednesday and I’m thinking we probably move above and hold that 282.38 level and consolidate for most of the day, but there is some significant risk for the bulls today. How much more gas is in the tank for the overall market? From a purely longer term technical standpoint, there really isn’t much to keep this thing from taking a shot at the highs, and then the 300 level. While that would excite almost everyone, that could also be the head portion of a head/shoulders pattern in the making. It really depends on how fast this market melts up once the FOMO kicks in at new ATH. The primary watch today is to make sure Wednesday wasn’t an upthrust trap.
Oil – Oil managed to finally break above the 58 level and is sitting 58.47 as of about 5:30am ET. Looks like another solid day, but I wouldn’t be surprised for this to come in a little and retest 58 before the market opens. One concern though is Gold, it’s down almost 1% premarket, with gold miners down even more. That’s not a great sign for commodities overall. A stronger Euro has been keeping the dollar in check, but the Euro looks like it might have hit some resistance for the week in the 1.1375 area, so the dollar could gain, which usually isn’t a help for oil. The OPEC MOMR is also out today.
XLE – Energy closed last week at 63.90, so it’s gained about $2 this week to 65.98. It has climbed above both the 8 and 20 day ma’s and seems to be taking aim at the 67 level. It is lagging the overall market at bit, as the SPY broke to new highs Wednesday, yet the Energy ETF was still well below the highs from last week. XOM and CVX have had strong runs and could be topping a bit with the SPY. I’m watching 65.65 as the first meaningful level on the downside, followed by 65. On the upside, keep an eye on Wednesday’s high of 66.01. RDSA and BP are both up about +.6% early premarket and FTI is up a huge 6%, so that is a good signal for the US market. BP had a big day yesterday up about +3.2% and it took out the 200 day ma easily.
XOP – The E&P’s had a great day on Wednesday, closing up about 2%. The Permian names were the weakest of the group, with CXO and PE red and PXD (+.5%) neutral. The E&P group has almost perfectly followed the path from the decision tree posted on Sunday, rising right up to the 20 day ma at 30. This is a big spot and we likely either get a total rejection and run back to 28 or we get a breakout past 31 with a shot at 31.50. On the downside, 29.90 and 29.60 are the points to watch. On the upside, 30.16 is the first resistance, followed by 30.35. Once it clears 30.35, it should be a quick run to 31, where the real fun could begin.
Longer term, there is a pretty big Wyckoff accumulation formation going on in the weekly chart. I’m really starting to feel like this thing might be sitting right on the springboard, ready for a markup. I’m considering a long position if we take out that 30.35 level today. This formation is set to explode at 31.50 and there is room to 40. What I’d rather see though is a light volume fade back down to retest that 24 level one more time, but I think it’s going to be difficult to take out the 28 level. Anywhere between 29 and 30.35 is a difficult spot for longer term traders, and trying to play the up or down breakout is pure gambling. Let the market tell you which way it’s going and then follow. At 31.50, get long for a breakout OR let it fade to 28 and buy the dip for a longer term bounce. Any other plays than that are just low odds.
Swing Trade Setups:
Most of the swing trade setups from Tuesday and Wednesday are still in effect, so I won’t cover them again except to say that MGY, CLB, GLNG and APA are all looking like solid options.
APC – Watch the 45.50 level for a breakout and run to 49.
COG – This is the quality name in the natural gas space and I like it for a breakout of the 26 level. If it can take that out, there’s space to 29.
EOG – If you are very bullish and very aggressive, this one is a long using that 86.14 as a stop. Would be nice to get a dollar or so pullback to give this trade a try.
GIFI – Anyone interested in the offshore market should give this one a look. It could be a nice play using a tight 20 cent stop to $9 and trying to capture a run to $11.
HES – This one goes against the grain a bit as a short trade setup. It’s purely a math play using $60 as the stop and looking for a breakdown to the 50 day ma around 54. The trade needs the SPY to roll over also. Keep the stop tight though, because if it does break through 60, it could be at 70 in no time.
CDEV – I strongly considered trimming this position on yesterday’s run to 9.40, but didn’t pull the trigger. I wish I would have. I might lighten up if it takes another run today.
Be careful out there today and make sure you don’t get caught up in what could have been an upthrust on Wednesday. Any failure at yesterday’s high is an important signal.