Weekly Energy Equities Review, Market Outlook and Trading Plan for August 3-7

Sometimes signals from charts are very direct and observable because we are looking for something specific to form on that chart. However, sometimes the best signals result from things that DON’T happen on the chart, especially when we expected something specific to happen. In last week’s writeup, I thought this would be a big week for energy and we would get a resolution of the forming head and shoulders type formation and a decision on which way this sector wants to go over the next few weeks. I think we got that signal, it just wasn’t in the form I was expecting. So which way are we going?

 

I know last week’s action was pretty depressing and most individual names closed the week way below where they started on Monday, but there were some sparks of hope in the sector on Friday and I think the market was offering a signal in its own strange way. The XLE has been setting up a rough head and shoulders with two important points at 36 and 34.50. On Thursday afternoon, the XLE struggled to hold the 36 level and got as low as 35.88, mostly on the depressing earnings from COP, which caused the stock to be down almost 10% during the day. Honestly, when the market closed on Thursday I was expecting the XLE to gap down Friday and get close to that 34.50 level, especially with XOM and CVX reporting earnings Friday morning. If those earnings reports were poor like the one from COP, the sector would likely gap and take out 34.50.

 

Those earnings reports from XOM and CVX were poor just like the COP report, but the market reaction was completely different from what I expected. Instead of tanking toward 34.50 on bad reports, the XLE merely drifted down around the 35.50 level and then found demand which pushed the price back above 36 at the close. Not only did we NOT tank to 34.50, but there was enough strength to get back above that important 36 level. That should NOT have happened on bad earnings reports and definitely not after the weak action we had on Thursday. Basically, the market was setup to fail, had the fundamental information (earnings) to justify that failure, yet it did NOT fail. That’s a positive signal which suggests we may be heading up from here to give that 38.50 level another look for a breakout toward 40+.

 

I’m not saying the bullish signal is perfect. There’s still a good chance that Friday was temporary demand with some players looking to cover shorts and/or find liquidity opportunity in the bad news. There’s always the possibility that 36 acts as a roadblock to the upward price movement. No signal is perfect, but usually when I expect a market to tank, and it has fundamental news to justify that tank and then it doesn’t, that’s normally been bullish. We’ll see if it works this time. My plan this week is to let price drift back down to the 35.50 area and then start building a long position. If Friday’s lows get taken out and price tests 35, then I’ll dump it.

 

Overall Market

The SPY showed some incredible resiliency this week, especially on Friday when it closed at the highs. It seems like it wants to test that 327 high area again and then make a run at all time highs in the 337-340 area. I’ve been saying this for awhile, but I think this market is on its way to SPY 400 later this year, especially once the election is over, the protests calm and the virus disappears. There’s just so much money in the system that I don’t see any way it doesn’t keep making new all time highs just like the QQQ has already done. I just can’t foresee any event that could stop this freight train. If the virus, business closings, unemployment, riots, etc didn’t stop it, then what could? If you look at the longer term chart, this whole event was a 21 day down move in a 12 YEAR bull market. It was a blip. At some point you just have to accept that the stock market is completely disconnected from the real world. It’s a public utility, a bank for storing 401k’s and that bank is going to be protected until the end of time. At this point, I’d be shocked if we see SPY under 300 again anytime soon.

 

My favorite market indicator is the IWM and it looks like it’s about to breakout and join the QQQ and SPY in attacking the highs. I’m watching the 150 level this week for a breakout and a move to the 160 area in the coming weeks. I’d love to see one more pullback to the 145-146 area to get long, but I don’t think I’m going to get that chance. The IWM has been one of the best leading indicators that I have found for energy. They both roughly measure the same thing – the US consumer. If the IWM breaks the 150 level and gets into that late February gap, then the XLE should head back up to the 38.50 level and breakout for an attempt at 40+. If 145 breaks to the downside though, the IWM could be headed toward 138, which would correspond to XLE breaking back below 36 and heading toward 34.50.

 

The dollar is another important watch. The move up in UUP on Friday was a bit strange with the SPY also moving up. They have been moving inversely, so one of them changed on Friday. I think UUP was probably just ready for an oversold bounce. Watch the 25 area to see if it tests and reverses upward. The EURO had a big reversal pattern on Friday and the YEN put in an even larger reversal. Watch these two closely to see if price returns to Thursday’s extremes for a retest. For oil, watch the USD/CAD pair. It spiked up Thursday as oil spiked down, so the relationship there was consistent. If the USD/CAD pair starts rising this week, that could be a red flag for WTI.  Stocks have preferred the weaker dollar, as have commodities including oil, so I’d like to see the dollar continue to weaken as support for equities.

 

As for oil itself, it really could have rolled over on Thursday, but just like XOM and CVX on Friday, it found demand and made a sharp recovery to reclaim the 40 level. Maybe the reversal in WTI on Thrusday was a precursor to the same  XOM/CVX reversal action on Friday. The opportunity for a collapse was there, but didn’t follow through and that’s a signal. The 39 area could be nice support this week for a possible attempt at making a run back toward the highs.

 

Gold was also interesting this week, especially the action on Friday. The UUP and GLD move inversely most of the time, but on Friday they both went up. The UUP/SPY relationship did the same. Since they move inversely, one of them was changing Friday. Given that the SPY and GLD (and TLT) all went up on a rising UUP, that makes an even stronger case that UUP was probably the one changing. The real question here is if the UUP change was a leading red flag or just an anomaly. I’m thinking the UUP bounce was just temporary and that it should head back down this week. Keep an eye on the SPY, GLD and UUP relationship.

 

Energy

I covered the XLE above, but the most interesting thing this week was the action in the majors on Friday. I’m not sure which was more impressive, XOM’s gap down and then green close or CVX getting down to 81.51 and then making a huge run to close at the high of the day. Either way, there was some huge demand in these two stocks on Friday. They make up almost half the XLE, so if there’s this much demand in the majors, then the rest of the sector should follow. I get the feeling that many traders might have been playing energy like I was this week, just pulling the bids all week until earnings on Friday and then making your play. Let’s see if these two generals follow through on Monday. Watch the Friday lows.

 

The other group that showed good strength was the Permian names. PXD, CXO and FANG were all nicely green on Friday, with CXO even managing to close above Thursday’s earnings report high. I wanted to play these on Monday, but never got the right setup. I’ll be watching them again this week for a Monday pullback to try and get long.

 

COP, EOG and OXY were’t quite as strong as the Permian names, but they are setup well going into this week. OXY long at the 15.75 level is my favorite play out of the group. I don’t really like the company, but that setup is perfect for a long play. It’s a play where I can get some great size in with a very tight stop. If price takes out 15.50, the trade is probably wrong. If I’m right, the price target is likely in the 17.50-18 range, possibly more if the sector breaks to the upside. That’s a pretty good 7:1 return.

 

I’m not crazy about the setups in the service names, but I still think HP might be worth a play long in this 16-17 area. Same case could be made for a long NOV play in the 10.75-11 area. I’m not really interested in HAL or SLB this week since there really isn’t any area to play a stop off of in those names.

 

The refiners aren’t really offering much right now. The only play in that area is a long HFC trade around 26. MPC, VLO and PSX just have too much downside risk for a short term play.

 

Remember, I’m a very short term trader, mostly daytrades and my trades are all based on technicals not fundamentals. These trades aren’t recommendations on the quality of these companies, but rather order flow and liquidity in the very short term. Just because I don’t like something like HAL or SLB this week, it has nothing to do with the fundamentals of the company, it’s more that they just don’t offer a solid technical setup with defined risk and ample reward.

 

Trading Plan for the Week – Simple energy plan for Monday, I’m looking for any pullback to get long XLE, the majors CVX and XOM, as well as a few of the Permian names. The only problem I have is if we don’t get the pullback but instead get a gap up. The question then becomes whether I want to chase these names or not. I probably will, but it will require some defined setups on Tuesday. But for now, I’m looking for any pullback Monday to start some long positions. Let’s hope the Sunday night open doesn’t destroy all the following trade plans.

 

The XLE trade is my favorite, but strangely OXY is probably the second best opportunity. I hate this company, but the setup in OXY is quality. I’m looking to get long in the 15.50-15.75 area with a stop below 15.50. Reward on the trade could be 18.00 for a huge R multiple play of around 7-9.

 

In the Permian names, FANG has the best setup in the 38.75-39 area. I’ll be looking to get long there with a stop below 38.50. Reward on the trade could be 42 for another huge R multiple play.

 

The last energy trade for Monday is a long play in HFC off the 26 level with a 25.50 stop. Target on the trade is 28.75.

 

There are a few trades outside of energy that are enticing. I’m still watching JPM and might give that a shot long against Friday’s low. If the SPY is going to break toward all time highs, the financials are going to have to join the party. I also like a long play in AXP off the 93 level. Both of those trades offer very defined stops and risk management. I’m also watching a V long play in the 188-189 area. It isn’t really a pure financial, but the setup is quality and can be stopped fairly, especially with the 200 day ma sitting just under this two month range around 185.

 

The CVS/WBA pair may offer some opportunity this week. I’m watching 62 in CVS for a long play and 40 in WBA. As summer winds down and the fall/winter flu season kicks in, these will probably be ready for a move up soon. I’m planning for short term trades on these, but they could very well morph into longer term plays if the momentum picks up.

 

I was able to enter positions in MGM (14.75) and LVS (43) from last week’s trade list. These are in the long term account and I might add to them this week. The casinos never got the shutdown that I was looking for and at this point I don’t think it’s going to happen, so an entry here with room to add on an unexpected shutdown is a decent play.

 

The INTC play at 51.95 has been a disaster, but I added to the position at 47.25 for an average price now of 49.60.  As I stated in last week’s writeup, this was a pre-planned add. There are very few stocks that I would make this play with, but INTC is definitely one of them. Like I said last week, it’s going to take awhile to heal, but when tech continues to run and INTC is sitting in this range, they will come looking for it again, especially if the company gets some of their fundamental problems resolved. INTC has been around a long time and I’ve watched them overcome problems before, let’s see if they make the recovery this time as well.

 

The last play for this week is a long in NKE in the 96-97 area. It can be stopped under 95 for a possible breakout toward the 104 level.

 

That’s all I’ve got for Monday and really all I can handle in one day. I haven’t been posting much on Twitter. Sometimes all the mask Karen’s, BLM protesters, political nutjobs, etc all gets to be too much and it intrudes on my mental peace. I just need a break from it on some weeks. Also, I’ve been moving my energy trading system over the healthcare sector. I can see the writing on the wall for energy and sometimes you have to prepare for the future when your chosen favorite area becomes untradable. I’m down to just a handful of energy stocks that are tradable in the very short term and I fear that one more tumble down in energy and there really won’t be anything left to trade except for long term plays. I need to have something to replace the daytrading opportunities and the healthcare sector is perfect. I’ll still be doing energy, but look for more healthcare trades in the future.

 

Enjoy the rest of the weekend and let’s hope energy can make a turnaround and move back toward the top of the range for a breakout this week.

 

Weekly Energy Equities Review, Market Outlook and Trading Plan for July 27-31

This should be a big week for energy stocks. The XLE has evolved into a pattern that must resolve itself soon. I’ve posted the rough head and shoulders pattern a couple times on Twitter over the last few weeks and price continues to develop along that pattern. From late June through this last week of July, the XLE has been forming a rough right shoulder in the larger picture and testing that upper boundary of 38.50. So far it has failed every test, but the pullbacks have been very shallow and if you just look at the last five weeks of time in isolation it actually looks like an inverse head and shoulders. Confusing. However, I expect that the larger pattern continues this week and we get another test of 38.50. Is this the week price finally breaks through and makes a run at the June 8 highs or does it fail for the final time and head for the neckline around 34? After a month in this 36-38 range, it’s time to make a big decision.

 

What clues can we find to predict the breakout direction? The first market I look to for a leading signal on energy are the small caps which are represented by the IWM. The IWM is the American consumer and domestic small businesses. It is the economy. When the consumer doesn’t spend, these businesses don’t do well. When the consumer isn’t shopping, working, going to school or travelling they also aren’t using energy. The IWM made a nice base throughout mid-June and into late July, but the attempt at breaking out of this base last week was a failure. The 145 level is a big decision point for the IWM this week. The action there will have a bearing on what happens with XLE. If IWM opens the week with an early test of 145 and then makes another run at 150, then I would expect the XLE to make another run at 38.50. Both should break out at the same time. If IWM fails at 145 and heads toward the 136 area, then XLE probably also fails at the 36 level and heads to 34.50. Keep an eye on this correlation.

 

I prefer the IWM over the SPY when trying to analyze the energy market. For the last few months IWM (and XLE) have lagged the overall market. SPY has broken that 323 level and the June 8 highs, however neither the IWM nor the XLE have approached those June 8 highs. The SPY has lost much of its predictive ability because it is being controlled by the FANGMAN stocks. The SPY doesn’t really represent the domestic economy or the consumer anymore. It represents fast money and a handful of manipulated stocks. When analyzing a commodity, everything comes down to supply and demand. The key is to focus on the market that better measures the people using the commodity you are trying to predict. The IWM does that much better than SPY.

 

The second thing to watch this week is the dollar. It continues to weaken but might be getting a little stretched. That weakness has been helping gold, silver and the basic materials stocks and should also help oil. I’m watching the 1.3350 level in the USD/CAD pair specifically for any clues on oil. Overall, the UUP broke a significant demand level last week around 25.90 and could be heading for 24.75. If the dollar continues to weaken, oil and energy stocks should at least explore the upside this week. Also, keep an eye on GLD as it might show the first signal of an upward dollar reversal.

 

As for WTI itself, it was a little shaky. It attempted to break the recent highs and was looking good early in the week, but faded on Thursday and Friday. The action wasn’t too bad though as most will look at this pullback as just a normal gap fill off the larger base breakout from Tuesday morning.  I think it takes another look at the 42.50 level this week to try and put in more highs. Many traders still use the USO for oil and it really has a nice setup for a long play on the open Monday. I’d like to see an open under 29.00 and then get long as price reclaims Friday’s 29.05 low. On the downside, watch any WTI break under 40 as a danger signal.

 

Energy XLE XOP CVX XOM

It wasn’t a good trading week for me in energy. I sat out the down day on Monday and then couldn’t catch up with price as it ripped on Tuesday and was then stuck on the sideline Wednesday, Thursday and Friday as price chopped around within Tuesday’s price range. Sometimes there just isn’t much available and you have to trade other things. Whatever happens with the XLE this week, I’d just prefer some type of breakout one way or the other. This range is just untradable.

 

On the positive side, the last five weeks have setup a nice inverted head and shoulders type pattern that may offer a long trade. It’s a good setup with shoulders around 36.50 and the head around 34.50, but how that recent five week pattern is developing in the larger picture could be a problem. Sometimes price action looks good in isolation, but when you take a step back and look at its place in the larger picture, things don’t look quite as good. I’d like to see the XLE start off the week with a test of the 36.50 area and then a bounce toward the highs around 38.50. I’m going to be very cautious if we come out Monday and take out the highs or gap up huge out of this range. Any attack on the highs right out of the gate is likely to be a false breakout and a trap. There’s no reason to get involved on the first breakout at 38.50. There’s a good deal of supply sitting 38.50-40 which should slow the breakout and there’s a high possibility that any breakout will come back down and test the 38.50 breakout point from above for a good long entry if everything is working together.

 

The majors are not looking too good, especially XOM. It’s having a very difficult time getting back above 43.75 and is in danger of breaking down and leading the sector toward recent lows. CVX at least broke the July highs, however XOM never even got close. Both stocks have earnings on Friday, so I won’t be doing much with these two ahead of those releases. It wouldn’t surprise me if they just chopped around until Friday and then made a big move on earnings. I’ll post a plan for these two on Thursday. BP and RDSA strength fall somewhere between XOM and CVX, probably closer to XOM. 

 

I like the E&P’s much better than the majors right now. There are several setups that I’m watching this week for long plays. Almost all the E&P’s have the same setup, a sharp breakout on last Tuesday and then a three day pullback the rest of the week. These could be ready to really breakout. My favorites this week are the Permian names including PXD, CXO, FANG and PE. All four charts look the same and play the same setup. I’d like to see these open Monday down below Friday’s lows and then reclaim those lows for entries on the long side. The other name that looks attractive is EOG. It has been very weak lately, but seems to be snapping out of it and looks to be setup just like the Permians with a long reclaim trade setup around 49. I don’t like the charts of COP and OXY as well as the others, but they could still be playable if they are slow to develop and the other names have already run too far away to enter long.

 

I’m not really interested in the services names this week. They are doing well and showing strength, but the charts really don’t offer anything tradable. It was good to see that SLB’s earnings were accepted and the stock didn’t get hurt on the release. The only name that I might play this week is HP. It has put in a very nice base over the last five weeks and could be a good breakout play in the 21 level to possibly make a run at 28.

 

The natural gas names had a good week but I have no interest in chasing these after the latest run. In fact, if there was any subsector in energy that I would consider shorting, these names are probably it. I’ll be avoiding them this week.

 

The refiners can’t seem to get things going to the upside. VLO was the only one that attempted a breakout last week and it failed. I really don’t see anything to play this week with the refiners. The only one that might offer some opportunity is MPC. If it can clear the 39.50-40 level, it might have some room to run a couple dollars. The problem though is that there’s just no place to stop the trade if it’s wrong. It’s been a continuous grind from 33 and the fall back down could be fast. The risk/reward just isn’t there on a long trade in MPC unless it develops a small level to play off of.

 

One other interesting thing that I saw this week was MXC. The low float stock got pushed all the way to 14.50. The daytraders in this bull market are reaching the euphoric stage. There was absolutely nothing from the company to prompt this move, it was purely daytrading rooms taking advantage of the low float and driving it with a few pumps in sub rooms. These plays look great in hindsight, but if you get caught in them you can really get hurt, especially on the short side.

 

Trading Plan for the Week: I’m hoping this is going to be a productive week, especially in energy. The ideal trade to start the week would be a gap down in XLE below 37.25 and a reclaim of Friday’s lows for a long entry and a run toward 38.50 for a possible breakout. More likely though, I think we probably gap up Monday in which case I’ll be cautious and wait to see if it’s a false breakout. If it does gap up, there could also be a long play off of 37.55 when it drifts back down. I’m not interested in trying to short anything energy early in the week.

 

Second trade is a long setup on one of the Permian names. I would take this trade with PXD, CXO, FANG or PE. For example on PXD, I’d take a reclaim long trade on any gap down below 99 and a reclaim of Friday’s lows. Basically, I’m looking for a test of the breakout point from Tuesday or at least a test of the low point where this group pulled back to after Tuesday’s move.

 

The only other energy trade this week will be long play in CVX around 89. This doesn’t have to be a reclaim setup, I’ll settle for a simple test of 89 to get long with about a dollar stop for an attempt at a breakout around 93.

 

Next trade is a long setup in IWM around 145. It would be nice to get a gap down toward 144.75 Monday morning for a reclaim long setup around 145-145.50. There’s a tight stop around 144.25 and there’s opportunity to 150 for a nice risk/reward on the trade.

 

One attractive non-energy trade is SBUX. I’m looking for a long setup to enter around 75 for a move to 77 with a possible breakout toward 80.

 

I’m also watching JPM for a long setup around 97-97.50. The long trade can use a dollar stop for an attempt at 101 and a possible breakout. If the overall market is going to go higher, this is one stock that I think really has to start moving.

 

I’ve been monitoring the casino stocks for awhile and LVS is starting to get close to a buy point for a longer term swing trade. I’ll be buying in the 42-43 area for the longer term account. I also like MGM in the 15-15.25 range. MGM probably has a better setup than LVS because there’s a really tight stop available. This one shouldn’t get below 15, so if you can pick it up around 15.25 you can really size this one up for a big winner. WYNN long around 70 is also on my list, but I like LVS and MGM better.

 

I picked up some INTC in the longer term account this week on the big pullback after earnings. I was a little early on the entry at 51.95, but I did leave space to add if it drops into the 48 area. I really think this was an overreaction and money will come back into this name. It may take awhile, but as the SPY moves toward 400 and the blind buying of anything tech continues, INTC will recover and probably set new highs. Just a name that’s going to require some patience.

 

That group of trades should keep me busy for Monday and Tuesday. Much will depend on the Sunday night open, but I don’t see a big gap up or down happening, so most of these plans should be available Monday. Good luck this week and hopefully we get some big moves.

 

 

Weekly Energy Equities Review, Market Outlook and Trading Plan for July 13-17

The overall market put in a very strong week and it looks like we are headed up to test the recent highs for the SPY in the 323 area. I was expecting a pullback to 307.50 last week, but the market never really got close to any kind of pullback. The lowest it could make was 310.68 and the bounce from that point was very sharp, which indicates the demand down there was big. Last week was basically a consolidation in the 314-317 area and it looks ready to break to new highs. This week is going to be an important one, but I’m still cautious. If this thing tops out at 323 and heads down, that’s an obvious failure and the stampede toward the exit could begin. The most important piece of advice I can give this week is to use those stops and keep them tight if you are playing the long side. This is one of those spots where a failure to hold to your trading rules could get really expensive.

 

Technically, the points to watch on the upside this week for the SPY are 317.88, 323.41 and 332.58. I’m watching 315.15, 312.75 and 310.68 on the downside.  The SPY (and QQQ) are being carried by the FANGMAN stocks (FB, AMZN, NFLX, GOOGL, MSFT, AAPL, NVDA). Keep an eye on this group and if there’s any weakness it might be time to get cautious. When the entire market is being carried by a handful of stocks, things can turn quickly if money bails out on those. There’s a lot of money looking for a safe place to hide in tech, but the higher these stocks go, the less safe they become.

 

The concern I have for this market is the IWM and XLF. While the SPY put in a nice consolidation based on the FANGs, IWM put in a clear downtrend last week opening Monday at 145.31 and moving down to touch a low of 137.24 on Thursday before getting that Friday bounce.  The relative weakness in small caps was high compared to the large caps. I expect that the IWM should take another look at the top of the range around 145.50, especially if the SPY breaks out. If the SPY breaks out and the IWM never takes out the top of the range, that divergence would be a big red flag. The XLF showed the same trend as IWM, but the bounce on Friday almost recovered the entire week’s losses. If this market is going to keep rising and take out 323, the financials must participate in a big way. Keep an eye on the 22.50-23.50 range in XLF this week. If the XLF can’t take out the highs of this recent two week range, then that’s another red flag on the market’s overall health.

 

Energy XLE WTI CVX XOM

Energy had a really bad week and just looks horrible compared to the rest of the market. The Monday through Thursday downtrend was much stronger than the rest of the market, but we did get a Friday bounce. I picked up a handful of names on Thursday hoping that this recent breakdown was the final move lower and that the sector will bounce sharply if the SPY does take out the highs. The trades looked good on Friday, but it remains to be seen whether this Friday bounce was just an oversold rally or the start of a new uptrend. The 36-36.25 area is going to be big for XLE this week. If that area rejects and fails, then price should quickly move back down to test last week’s lows at 34.24. Those lows last week were also an important test of the May 14 low point of 34.30. That’s almost three months worth of trading above that support level and if price breaks that level it’s probably going to start a new leg down and destroy any hope of this being a Wyckoff consolidation pattern.

 

I was able to get a long position in XLE at 34.54, but if price moves below 34 I’m probably going to be forced to cut the position, as well as all the other names from Thursday. I’m willing to hold the positions for a retest of the May 14 and July 9 lows, but if those fail I’m probably going to be out. If those low areas fail, I think the sector likely falls to a much better level for possible entry into these names. The next level down is 31.

 

The scenario that concerns me the most this week is if the SPY makes a move to 323 on Monday, gaps up Tuesday and then fails around lunchtime with a collapse Tuesday afternoon. If that SPY move happens at the same time XLE tests 36 and fails, then that likely causes an XLE test of 34.24. If the SPY continues to fall the rest of the week, that likely pulls XLE down about 10% toward the 30-31 range. I’m not saying that happens, but it’s definitely something to keep in mind. Also, if this did happen, I’m not interested in trying to short any energy names. The plan is to wait and let them fall for new long positions at better prices. I really don’t see a market collapse anytime soon, but a pullback to 300 isn’t out of the question.

 

I think the only thing that saved energy names this week was the move in WTI back above 40. I’ve been watching that rough head and shoulders top pattern in WTI and right now it looks like it has failed to evolve. The oil price move toward 38 was met with solid demand and WTI has actually setup nicely for a test of the highs this week. Keep an eye on the dollar to see if it supports an oil move. I’d really like to see UUP keep dropping and take out the late December 25.93 low and early June low of 25.88.

 

The majors were very weak Monday through Thursday, but did manage a bounce on Friday. XOM needs to get back above 43.50 and CVX needs to reclaim 87 for the sector to gain momentum. If XOM can reclaim, then it could have room to move to 46. In CVX, any reclaim of 87 could lead to a move back to 92. BP and RDSA have very similar patterns.

 

For the E&P’s, I’m watching the 38-40 range in COP for direction. The VWAP off the March 23 bottom comes in at 37.75. There could be a nice reclaim long trade setting up in COP one day this week on any gap down. The name that surprised me the most this week was EOG. It’s very weak and didn’t get much of a bounce on Friday. Of all the positions I took on Thursday, this is the one I’m most concerned about and it’s probably the first one that will get dumped this week.

 

The service names were decent and HAL is setting up a nice long trade opportunity at the 11.50 level. Watch NOV around 10.50 for another trade possibility. I’m in SLB at 17.34 and the bounce and close at 17.79 gives me a little breathing room on this one. Once I see what the XLE and SPY want to do this week, I’ll be building the position once it crosses 18.25.

 

The refiners were a bit of a mixed bag. I missed a great trade in MPC, but it just didn’t setup like I wanted. I also tried to pickup some PSX premarket on Friday around 57.50, but somehow never got a fill. I took a position in VLO at 50.97 Thursday, so I’ve got a little breathing room in that one too with the 53.65 close on Friday. The action around 56 will be important.

 

I still don’t really like the natural gas names but EQT is setting up for a nice long trade in the 12.25 area. I’d like to maybe see a gap down one day this week for a reclaim long trade in that name. COG looks ok too in the space, but EQT is just a better setup.

 

Trading Plan for the Week – This week all depends on the SPY and the action as it approaches 323. I’d be surprised to see a down day on Monday, but it isn’t impossible since almost everyone is expecting that 323 run. There could be some long opportunity if Monday gives a pullback and traders bailout thinking the 323 move isn’t going to happen. If I play that pullback on Monday, it will likely be with IWM. There’s some decent support around 140 for a long play.

 

I’m focusing strictly on energy this week, so I don’t have any setups in any other sectors or stocks. The only thing on the radar outside energy are the casino names. I’m still interested in MGM and possibly LVS/WYNN. I’m surprised that there’s been no talk of any casino shutdowns, but I think it’s still a possibility.

 

In energy, I’m probably just watching on Monday to see what happens with XLE around 36-36.25. My main focus this week is trying to build the small positions I took on Thursday for an XLE run up to 40. I think there should be some good setups on Tuesday and I’ll try to do a separate writeup Tuesday morning if that develops. Same thing on Wednesday. Sorry for limited setups and trade ideas for Monday, but I just don’t see much. Once I see what happens with the SPY on Monday and then the early premarket action on Tuesday, I think there should be some great opportunity for the rest of the week.

 

In summary, I’m watching SPY/IWM, possibly playing long on an early Monday pullback. If there’s no pullback, then I’ll be on the sideline watching as XLE approaches 36-36.25, at which point I can make some better trade plans for Tuesday.

 

It’s a beautiful day here, headed out for a run and then a trip to the winery. Let’s hope this market can show us something good this week, but I’m still going to be cautious and probably a little tight with my plays. The little voice in my head that is warning me of a big market pullback based on fundamentals is still there. Good luck this week and play safe.

 

New Energy Positions and Trade Plan for Friday, July 10

I picked up a few small energy positions Thursday and wanted to post a little longer note than what I could put on Twitter. I started positions in EOG (45.24), COP (38.74), VLO (50.97), XOM (41.54), SLB (17.34), CXO (48.00) and XLE (34.54). Each position was about 15%, which means that if the final position is to be 1000 shares, then these starting positions are only 150 shares, or about 15% of the total planned position.

 

The reason for the trade begins with XLE.  Today it hit the 50% retracement of the move off the March lows. In the next few days, I’d like to see it establish a support point for a bounce to create an Automatic Rally point to begin a Wyckoff accumulation formation in the 34-41 range. All the other positions, except COP, were also somewhere between the 50% and 61.8% retracement range.

 

This 50% retracement level also gives a tight stop on the trade. If the XLE gets much below 34, then this probably isn’t a Wyckoff setup and we are probably looking at a decline to the 30-32 area. The real danger here is that the March 23 low is going to end up being the selling climax and the June 8 high might have been the Automatic Rally point, which then sets up a trading range between 23 and 47. I really doubt that is going to happen though as that wide of a range is not normal and would probably take over a year to play out. I’m hoping the actual consolidation accumulation range ends up being 34-41 which then leads to a breakout toward the June 8 highs and an extended uptrend.

 

I’d really like to see XLE put in a solid base point with heavy volume on Friday and finish the day green. That kind of action might lead to a reversal back toward the 36 level where I can then add to these positions and build them as the trend starts upward toward 40+. If things continue to deteriorate on Friday, I’ll just hang on to these small positions and let them establish a bottom next week and then figure out how to proceed. I definitely have no problem adding to these positions if XLE wants to take a big dip under 30. These trades provide a lot of options on which way to build them for the next couple of weeks.

 

I’ve already got a refiner, a service name, an integrated major, a major E&P, a major diversified shale E&P, a major Permian E&P, and an index ETF. I’ve got a few other names that I’d like to add to the list of small starting positions including: COG around 16 for a natural gas name, HP around 16 for a second service name, PSX around 56 for a second refiner/midstream, DVN near 8.50, OXY near 15, PE near 8 for a smaller Permian, and PXD near 85 for a second major Permian name.

 

WTI was due for a pullback and the next major point to watch on the downside is 38. I’ve been thinking oil is trying to form a head and shoulders type pattern, but it just hasn’t evolved into a clean pattern. That last “right shoulder” area that tested the 42 head area was just too strong. The pullback in WTI in the next week will be very telling. If 38 holds and this starts running back up toward 42 again, that would kill the head and shoulders idea and these energy names should also move up with it. If 38 fails, then we are probably looking at 34.5o which would probably take XLE down to the 30-32 area.

 

One other thing to watch is the dollar. The UUP is a rough stock estimate of the dollar index (DXY) and seems to have made a decent reversal upward on Thursday. I’d like to see that reverse back down on Friday and make a run toward the 25.88 low from June 10 and the 25.93 low from December 31 . If the dollar continues to strengthen, that’s probably going to be trouble for oil. The UUP-USO (DXY-WTI) correlation is an important one.

 

The other important watch for Friday is the IWM. Small caps and oil have been moving together as a reflection of US domestic business and the consumer. IWM and XLE have both shown big relative weakness to SPY and I’d like to see that change on Friday. Watch the 137.11 area in IWM to see if it holds. Any green close for IWM will probably pull XLE up with it. And of course keep watching QQQ and the FAANG stocks. Those five names are holding this entire market up. While that’s a good thing on the way up, it’s going to be an absolute killer on the way down.

 

It really wasn’t a great day for energy, but sometimes that’s where the opportunity is. Buying on pullbacks is difficult and never comfortable. All you can do is plan the trade out, follow the plan and hope for the best. If these positions don’t work and energy does collapse, then I’ll be more than happy to play that game and load up on the big dip as well. Keep all options open. Good luck Friday.

Weekly Energy Equities Review, Market Outlook and Trading Plan for July 6-10

Many times my daily trading plans end up in the trash by 9:35 am. This past week was one of those times. I knew in the first 5 minutes last Monday that I had made a mistake in my market view. But those mistaken trade plans usually turn into some of my best trading days. This game isn’t about prediction, it’s about knowing which way the market is going and then following. The great thing about a bad prediction is that it shows you where you are wrong. And when you know which direction is wrong, then you also know which direction is right. Follow that direction.

 

The market sent a clear signal this week. I don’t necessarily fully agree with it, but that doesn’t matter. The market is signalling which way it’s going and the only thing you can do is follow. In last weekend’s writeup, I was looking for the market to continue its three week downtrend into that 296-300 area, test that breakout area and then either bounce or more likely fall back down into that 279-296 range. Instead, the SPY opened Monday morning and visited that 296-300 area, touched 298.93, and then went on a complete straight line rip to the upside before stopping around 316. That move suggests that there was huge demand in that 296-300 breakout area and that this market had no desire to get back in that 279-296 range. I don’t really know WHY there is demand there, because fundamentals mostly suggest that there shouldn’t be. But it’s there and you have to acknowledge it and ride that trend. The market signal is UP.

 

If you have been reading me for awhile, you know that most of my trading is based on Wyckoff principles. We are in an interesting formation right now. SPY had the run off the March 23 bottom, and then the buying climax run in late May through early June, but now we sit in a specific formation of consolidation. The ultimate question right now is whether this current formation is a distribution or a re-accumulation. Let’s take a look at the current formation which began on June 11.

 

The SPY peaked out around 322 on June 10 and then had that first real pullback to 298 on June 11-12.  That initial pullback set the lower bound of this current consolidation formation at 298. Once the SPY found demand around 298, it then bounced on June 15-16 to form the automatic rally point around 314 which marks the upper bound of the current consolidation formation. Once those two bounds were created, price has remained inside the formation for the last 12 trading days. The question we now want answered is which way do we break out of this range? Is this consolidation a distribution or re-accumulation? Is the big money dumping on retail buyers in this range or are they buying more for the next leg up?

 

At this point, there is no real way to know the direction of the breakout from this consolidation area. We can only gather clues as they are offered each day. The important clue from Friday was the opening action which tested the upper bound of the range and failed quickly. There was fairly large supply there on Friday morning which also showed up in the last hour and closed the SPY near the lows for the day. Friday’s early rejection and late collapse showed that price isn’t ready to leave the range and there is more consolidation work to do. I expect that the next move for SPY is a pullback to the middle of the range around 307.50 where a decision will be made. Does it bounce there and take another shot at the top or does it fail and move down for another test of the bottom of the range around 298?

 

I’ll be looking for a shorter term trade long off of 307.50 this week and hoping price will make another run at the top of the range for a possible breakout at 315. For my longer term swing trades, the setup I’m looking for in the next couple weeks is a spring at the bottom of the formation around 298. I’d like to see price move down and test that lower bound one more time for a final shakeout and stop hunt before setting off on the next leg up. I will be loading up heavily long on the next visit near 300. The important points to monitor SPY price action this week are 315.75 (last week’s high), 308.25 (last week’s VWAP), 307.33 (8 day ma),  307.50 (range point of control) and 298.93 (last week’s low).

 

One other important thing to watch this week is the QQQ. In last week’s writeup, I pointed out that for this market to move higher the QQQ was going to have to reclaim that 242-246 range. Not only did it reclaim that range, it blew it out of the water and made it as high as 254. But I’m still nervous about tech and the QQQ. The FAANG stocks are all looking toppy (of course they have been looking that way for years). The recent chart has put in a “three pushes” type pattern and could be due for a big pullback. This market will go as tech goes. See if some of this money comes out of tech and moves into financials this week.

 

Energy XLE CVX XOM WTI

The energy names are clearly underperforming the market again and it’s difficult to get excited about them right now. The SPY and IWM are forming consolidation ranges near the highs for possible breakouts, yet the XLE remains trapped near the lows of a nearly four week downtrend. The relative weakness is just too much to ignore. The $2 range in XLE was simply unplayable last week, which was the main reason I avoided energy and stuck with daytrading the IWM. Is there any hope for energy names?

 

The only trade I see right now is a longer term XLE swing trade setup at the bottom of the range around 36-36.50. I’ll be looking to put on a long reclaim trade one morning this week if there is any gap down open below 36 with a 36.31 reclaim entry.

 

The majors did nothing this week. XOM has been sitting in a $2 range for the last 7 trading days while CVX has been stuck in a $4 range. There’s just nothing available to daytrade when these names get stuck in such tight ranges. The only trades I see on either of these names are long swing attempts at the lower bound of the range, that being 86 for CVX and 43 for XOM. I wouldn’t try to catch the falling knife on them either, I’d definitely have to see some type of risk controlled setup with a tight stop because if the SPY does fail at 307.50 and retest 298, many of these energy names could collapse quickly. Energy names made no effort to move up as SPY ripped last week from 298 to 316, so I can only imagine that if SPY turns down then energy will move down even more quickly.

 

I hate to be a real downer, but I don’t like energy right now. I’m bullish on the larger market overall, but the energy sector just isn’t showing anything positive. At this point, I need to see something positive before I get back in these names. However, things can change quickly in energy. The one thing that would get me interested again would be a quick move down for a stop hunt and shakeout on these names and then have demand step in quickly. It feels like most of these stocks need to test the lows one good time to restore confidence. I think there’s just a total mistrust for these names right now, especially since you can buy pretty much anything else and likely get a better return. There’s just no reason to choose energy over something like tech or financials.

 

As for the commodity itself, WTI didn’t show much last week. I’m still looking at that head and shoulders top formation in the 38-42 area. That 40-42 area is going to be big this week. If price can breakout to new highs, my view of the sector would definitely change. However, if price puts in a clear reversal then that just confirms what I’m seeing in the individual stock names. One thing I would keep an eye on though is the Dollar Index (DXY). I’ve seen multiple people pointing to a future decline in the dollar which could be a help to oil prices. It hasn’t developed yet, but keep it in mind.

 

Trading Plan for the Week – As usual, everything depends on the Sunday night open. Creating a trading plan before seeing that open has been difficult over the last few weeks. The ideal situation for Monday would be a gap down in XLE to around 36 and then a reclaim of last week’s 36.31 for a long entry. My guess is that we get some type of open right in the middle of the slop range from last week and I’ll have to sit out the morning and wait for something to develop in energy. And then nothing will develop and I’ll lose interest completely in energy and move to the IWM, LOL. I’m not interested in shorting energy (or anything else) this week.

 

My second trade target is MPC. It was on the trade plan last week but it never setup correctly. I’m hoping for a gap down open around 34.25 for a reclaim entry long at 34.69. VLO has a very similar reclaim trade that sets up long around 55 and 55.66.

 

Unfortunately, those are the only energy trades I’ve got for Monday. Outside of energy, I think financials might be the sector to trade this week. I have a long reclaim setup scoped out for JPM. I’m looking for a gap down open below 91.50 and then a reclaim of 91.93 for a long entry. A similar trade sets up in AXP with a gap down open around 92.50 and a reclaim long entry of 93.34. I’ve been waiting on WFC to setup for a few weeks and it looks like a prime target this week on the long side. It could be setting up a long spring entry in the 24.50-25 area. Financials will probably be my main focus this week.

 

I had INTC on a couple recent trading plans and I’m still watching that one around 56 for a reclaim long trade to setup. It may not happen this week, but is worth watching for. Also, keep an eye on SMH. It’s sitting at highs in a nice tight base and could be ready to break higher. Watch that 155 level, as it could offer the first clue of any reversal in the larger QQQ. I’m not trading SMH, just watching for clues about the larger tech sector.

 

MGM is still on the radar. I still expect that the casinos are going to get shut down again for either 60 or 90 days. If there’s even a single cluster somewhere in the country that originates from a visit to Vegas, that shutdown likely happens quickly. I’ll be a buyer of MGM if the shutdown happens. I’d like to enter in the 12-14 range, but will probably scale in slowly in pieces. I’m also watching WYNN and LVS.

 

That’s really all I have for Monday. It’s a short and limited writeup on trade plans. I think this could be great trading week though, it’s just one that will be played more by ear than usual. The signal from the market is that we are moving higher. I don’t really agree with that signal, but the market is always right and I’ll be trading the long side on Monday until the market tells me otherwise.

It’s Sunday and you know what that means! It’s going to be a two bottle day out in this heat. But the music should be good and the company even better, so I hope everyone enjoys the rest of the weekend. Life is short, don’t waste a minute.

Weekly Energy Equities Review, Market Outlook and Trading Plan for June 29-July 3

Hope everyone had a great trading week. I didn’t do much trading in the energy sector this week because my attention was focused on scalp trading the IWM. The range and opportunity in the IWM has been ideal lately, whereas the range in energy names, especially XLE, just keeps getting smaller. I’ve mostly abandoned trying to do any multi-day swing trades because there’s just no pattern to where this market is going to open each day. While many people have recommended moving to a longer timeframe to get away from the HFT algos, I’ve actually found the better option is moving to a shorter timeframe and trying to take advantage of them. However, I do see some longer term opportunity developing in energy and there may be some good swing trades developing in the next week or two.

 

Let’s start at the top and work down to energy. The SPY remains in a downtrend which started back on June 9 and it didn’t show any intention this week of trying to break out of that downtrend. It really had a good opportunity to turn things around with a breakout on Friday, but there was just no demand in the market and price finished right at the lows for the day and week. The action on Friday suggests that the upcoming four day week is probably going to be negative. One thing that I would watch for though is a big up day on Thursday to make things look good for the three day July 4th weekend. Trump will be out in full force during the weekend and you know he will be touting how well the stock market is doing. If you play it short this week, it might be a good idea to square up and cover on Wednesday afternoon.

 

While is seemed like a negative week for the SPY because of the direction, the range stayed within the prior week’s range and produced an inside week. The last four weeks have actually been a consolidation with each week alternating red and green with large ranges. It feels like the market actually doesn’t know which way it wants to go, which is at least better than a clear downtrend. The VWAP for the week finished about 306 and that will be a major point of resistance for next week. The next supply above that is the 310 area. On the downside, the point to watch is 297. We touched that level back on May 27 and June 15. It has acted as solid demand for the last 8 weeks. If you remember, that 296-300 area was the level I was watching when we were in that 279-296 range and looking for the breakout. It seems like the market wants to drift back and test that breakout point next week. If it fails, then price probably heads to the bottom of that prior range around 279. If the 296-300 area holds, then I think we probably finish the week around 305-307. I really don’t see next week getting above 310, but you never know.

 

On the IWM, the level to watch on the downside is 134. The IWM also formed an inside week and finished with a VWAP of 139.50. It actually felt like the IWM was a little stronger than the SPY to end the week, which could be a good signal for energy. I don’t follow the QQQ closely, but the chart suggests that this is where the danger is for the overall market. The QQQ had been in a tight range between 242 and 246 which began back on June 16, but it clearly broke down on Friday finishing at 240. If the overall market is going to rally, then the QQQ needs to quickly reclaim 242 and get back in that prior range. If it fails to do so, price could be headed back to the 232 area. Tech has been carrying this market and things could get ugly if the big money starts bailing out on that sector.

 

The other area that is starting to become a concern is the financials and XLF. There was an important area around 23-23.50 which failed and the big banks just don’t look very good. I do see a possible trade developing in WFC, but it needs more time to setup. I’d watch the KRE also, as the smaller regional bank names reflect more local lending and credit issues. If the two main market drivers of technology and banking stocks start to head down, this entire market could fall hard.

 

Energy XLE WTI

The energy names really had a good run off the March lows, but that XLE move from 38 to 47 now looks like a buying climax and blowoff top. XLE has rolled over into the first pullback from that run and is looking to establish an AR point for a possible re-accumulation formation. In last week’s post, I thought the AR point would be established around 35-36 and it looks like the XLE is really trying to find demand there with a close for the week at 36.49. There’s a small level at 35.55 that needs to hold this week. That point is about a 50% retracement of the run off the March lows. If that area fails, the next demand doesn’t show until 32-33, and that’s way below where an AR point should form and means that the possibility of this being a re-accumulation falls and the possibility of this being a new leg down toward the March lows rises. The 35-36 area is going to be big this week.

 

As for the actual commodity, I fear that WTI is evolving into somewhat of a head and shoulders type top in the 38-42 area which could lead to a move back to 30 soon. The move on Tuesday was a clear failure and the point to watch now is 34.50. Price should see a bounce there, but if it doesn’t then price is likely headed 30-32. I don’t really see WTI taking out the 26-29 level again, but strange things have been happening in oil over the last few months.

 

The majors are also exhibiting a rough head and shoulders type pattern which mimics the pattern being formed in WTI. XOM, CVX, BP and RDSA are all sitting near necklines following big spikes in early June. CVX is the one to watch. There’s a left shoulder around 96, a head up at 103 and a neckline around 86. There’s also an important VWAP off the March lows sitting at 84.75. Friday’s action took a shot at that 86 neckline and closed at the lows of the day and week. Monday’s open is going to be important. It will be interesting to see if these names make a move to form the right shoulder. If 85-86 fails and this thing starts down, there’s probably going to be an extended move down toward 75. As for XOM, the same pattern is there and price is sitting right on the March 23 VWAP at 43.50. If price takes that level out, then control of the stock clearly shifts from buyers to sellers.

 

Having said the above, there are some great trades setting up in CVX and XOM. I like CVX better and if it gaps down below 86 on Monday’s open, I’ll be looking to take advantage of a reclaim trade and get long for a bounce back toward 94, which could form the right shoulder. It’s an easy trade with a risk of $1-2 for a reward of $7-9. The same trade sets up in XOM at 43.50, but that one is a little more tricky because there is also level close by at 39-40 which might be a truer neckline and a better trade area. The same trade also sets up in some of the larger E&P’s like EOG, PXD and FANG. The support area on all these stocks is very obvious and should give very clear signals for the next longer term trend move.

 

The service names are also setting up some nice trades. I’m starting to get interested in SLB down around 15 and HP around 16. HAL and BKR aren’t really setting up very well. NOV is another watch around 10-10.50. Some patience is definitely needed with these trade setups. If the SPY really does rollback toward 279, then these energy names could easily overshoot to the downside, especially if WTI collapses back to 30. A stock like HP could easily break the 16 area and be at the March lows within days of breaking down. The key on these longer term swing trades is to scale in slowly on the entry. Separate the trading money into 3-4 pieces and enter at certain levels as the stock falls and try to end up with a decent overall average price. It’s a more risk controlled way to trade, but it does take some advance planning so you know well ahead of time where your levels are and how much you want to invest at each level. I’ll post more of my longer term trades as things get closer to prices that I like.

 

The refiners were a disaster this past week. MPC, VLO, PSX and HFC all had big down moves which finished at the low of the week. The only refiner that presents any possible trade is MPC. I’m watching the 34-34.50 level for a reclaim trade on the long side.

 

The natural gas names have been confusing for the last couple of months, but they all showed their hand with big failures. COG and EQT are now in strong downtrends as the price of natural gas just continues to crumble. I’m avoiding all these names. The only reason I continue to watch them is for the outsized effect they are having on XOP. The natural gas names have pulled the XOP from 72 to 49 in just a few weeks. Other E&P’s didn’t help, but the natural gas names and refiners have had bigger down moves than other energy names, so the XOP has been hit worse than XLE. I’m also avoiding XOP for now. That ETF used to be a favorite, but the weightings just don’t represent the overall sector anymore.

 

Trading Plan for the Week – The entire plan for the week depends on tonight’s open. The primary plan is to look for a gap down near 36 in XLE and then play a reclaim trade long as price crosses 36.33 and regains Friday’s range. Target on the trade is 37.50-37.80. The stop on the trade goes just under the morning low. The only problem with these reclaim trades is if price opens too far from the entry to make a playable stop. For example, if XLE opens in the 35-35.50 range, then that stop would be too far from 36.33 and make the risk:reward unprofitable. It’s always a judgment call and you have to know your profit target ahead of time to determine if the risk/stop is worth the reward. If price gaps down and never reclaims 36.33, then I’ll just watch the action and see where the bottom is. Price could easily slide down and test the 35-35.55 area. I’m not interested in shorting any energy names.

 

The second trade is a long reclaim trade on CVX. I’d like to see it gap down around 85.50-86 and then reclaim last week’s low of 86.18 for an entry. Target is 90.50. The stop goes just below the morning low before the range reclaim entry.

 

MPC is also setting up a nice reclaim long trade at 34.66. The 34-35 area has been solid demand and a long trade there can be protected with a tight stop with the possibility of a move back near 39.

 

The best trade of the week for me is probably going to be a reclaim long setup in IWM. I’m looking for a gap down near 136 and then a reclaim of last week’s low of 136.29 or Friday’s low of 136.49. This should be an excellent trade since the reclaim area covers Wednesday, Thursday and Friday. There should be a lot of demand, as well as many shorts who might cover when the range gets reclaimed. There’s also a major IWM support area at 134 which should control the downside. If price never reclaims 136.29, then I’ll be looking to put on a straight long trade at 134 with about a dollar stop to see if we get an early week reversal. If it touches 134, I’ll give it an hour or two to bounce. If it doesn’t bounce quickly,I’ll just dump it.

 

Next on the list is a longer term trade in MGM. Price has faded all the way back to 15.70 and I’m looking to start a scale in soon. The best entry will be the point where new casino closures are announced. If there is an overreaction, I’ll be get getting in. I don’t know what price that might be at, but I think the entry could be in the 12-13 area, but that’s just a guess right now.

 

INTC is moving toward a nice long setup at 56. I’ll be watching this one on Tuesday to see if it sets up a long reclaim opportunity on the open. I’m not really interested in a straight long on a decline, as I don’t want to catch a falling knife on this one. This is a play that will probably require a very controlled entry and stop.

 

It should be an interesting week. I’m still mostly avoiding Twitter, but I do check it before market open and after the close if you have any questions. I’m off to do the usual Sunday winery trip with the love of my life. A new wine on the menu this week and live music. Don’t waste a minute of happiness with all this social media crap, life is short, so enjoy it all.

Trading Plan for Friday, June 19

This has been one of the slowest trading weeks in the last couple of months and the trading plans really haven’t amounted to much this week. We are stuck in a trading range and the only trades available in this environment are very short scalp trades. Unfortunately, there isn’t really much that can be done until this market breaks out of this range and shows some kind of trend. Trying to trade a range like this is just going to get most traders chopped up with nothing to show but a bunch of wasted commissions and stopped out trades.

 

I don’t see much developing today either. I’d guess we finish the week with another low range day that isn’t really tradable, but surprises do occur in this market. It looks like SPY is going to gap up above Thursday’s high, but it probably just traps some eager bulls and then drifts right back into yesterday’s range. The only trade that might possibly present is a gap up and a test of Thursday’s highs, which holds, and then a move up to finish the week with a move toward 316 and possibly a move into the gap to 319. I’d be willing to try a long on a test of Thursday’s high from above with a stop of no more than 50 cents or Thursday’s close of 311.74.

 

There’s probably not much to do on the short side Friday because there just aren’t any sellers out there. The lack of sellers is just causing a natural drift upward. The market will keep auctioning up until it finds supply. I’d guess the first supply comes in around 316 and then 319. They are pretty much pushing this market wherever they want on the upside because there’s nobody there to stop the move. There’s no reason for the buyers to stop the drift, so the short side is probably not in play today. The only way I’d get involved short today is if the SPY volume spiked abnormally high and took out Thursday’s lows around 309.50. Otherwise, we continue to drift sideways to up.

 

As for energy, there’s just nothing there right now. Thursday was a solid green day and it looks like there’s a big gap up developing this morning, but I have no desire to chase energy names going into the weekend. I’m guessing we get an XLE gap up to around 41 and then a drift back down to Thursday’s high of 40.61 for a test. If the test holds, price likely bounces to the 41-41.50 area. If the test of Thursday’s high fails, then it likely drifts sideways between 39.50 and 40.50 for the rest of the day. I don’t see a situation where this takes out 39.50 for any reason since there just aren’t any sellers out there.

 

The only real play for me today will be very short scalps in IWM. It’s sitting 143.75 right now but I think it probably drifts back down and retests the 142.75-143 area. This gap up breaks the trendline that I posted Thursday, but premarket breaks aren’t the most dependable. Price closed well below that trendline Thursday, so it probably comes back down to close this overnight gap in this situation. Thursday’s 141.79 close was right on the week’s VWAP, which also suggests that the gap closes. I’d also keep an eye on last week’s VWAP of 143.39.

 

As for individual energy names, I’m not interested in chasing any of these on a gap up. There’s just too much danger of the market failing and falling back into Thursday’s range. Sometimes the environment just isn’t conducive to good trading and the better plan is to be patient and wait for things to develop.

 

Unfortunately, today looks like a wasted trading day and I’ll probably be shutting it down at lunch. There’s better things to do than sit and stare at a market that is consolidating. But this market can surprise, so don’t get too comfortable. Good luck.

 

Trading Plan for Thursday, June 18

Wednesday didn’t have much to offer. Sometimes you can create a plan and it just doesn’t develop. I took the XLE trade on the open but it was pretty clear that it wasn’t going anywhere. I cut it breakeven and I don’t think the XLE ever got back above my entry price for the rest of the day. It closed at 39.69. Energy was a weak sector and I don’t see it doing much today either.

 

One quick note for people who don’t follow me regularly, I’m a daytrader and these plans are only for one day’s worth of market action. They don’t carry over day to day and none of these trades are meant to be carried overnight. I’m strictly a technical daytrader and I DO NOT use fundamentals for my trading. If you are looking for trading advice based on fundamentals, then I’m not the person for that advice.

 

The theme for Wednesday was to let price drift down to the Monday high area and then take it long. The bounce never happened and most energy names closed below Monday’s highs. Today I’m looking for more downside and a possible run at the lows from the open on Monday. The important points for the XLE remain 38.71 and 37.00. The only place I’ll try a long today will be 38.71. I’ll try either a straight long or a reclaim long depending on where the SPY opens.

 

The key for today is the IWM. It has been in a clear trend up since the March lows, but there is a downtrend line from the June 8 highs that is blocking further movement up. I posted a chart in the morning plan Twitter thread.  Energy will follow the IWM. The important points for the IWM today are 142.75, 143.39 and 145. If price takes out 145, then it’s probably headed to the 154 area next week. On the downside, watch 141.32. If that breaks, then there really isn’t much to stop price from heading back to the Monday opening prices which were the lows for the week so far. Keep an eye on the relative strength between IWM and XLE.

 

The important points for the SPY are 312.69 and 315.64 on the upside and 310.36 and 307.67 on the downside. While the IWM filled the gap from last Thursday, the SPY never did. If price takes out 315.64, there’s room to run to about 319 and close that gap. I’m willing to give the 315.64 area a breakout trade long if the opportunity presents. Use a .50-$1 stop for a possible $3 reward. If price gets to 319, I’m still looking to get short there.

 

I don’t have much for individual energy name trades today. This market could really go either way and the more productive approach today is to trade the overall IWM and SPY off the structure set out above. The only theme that stands out for energy names is that many of them closed below the current week’s VWAP. If the IWM moves up and gets rejected, then I’ll be looking for shorts on energy names that hit resistance at those weekly VWAP points. Examples:

EOG short 53
MPC short 38, VLO short 64
XOM short 47.50
XOP short 59

 

I’m probably not playing any energy names on the long side today since there really isn’t much structure to use as a stop and there’s too much supply overhead, not good combination. Let’s just hope there’s some movement and opportunity today and we don’t get a repeat of Tuesday/Wednesday. Good luck.

Energy Trading Plan for Wednesday, June 17

Tuesday was 30 minutes of fear and six hours of boredom. Tuesday’s trading plan was decent, but the market moved so fast premarket that I didn’t get an entry on anything. Most energy names broke out of the small bases they were forming and moved well into the gap created last Thursday. The best names were COP (+4%), EOG (+4.6%), PE (+5.6%) and OXY (+6.5%). The worst pick was COG and the other natural gas names.

 

As of 5:30 am Wednesday, it looks like we are headed for a flat to up open with the SPY reaching a high of  316 around 4:30am. The XLE is +.5%. The SPY likely either moves up and closes that Thursday gap to around 319 today or it fails and heads down to test Tuesday’s lows around 308.50. That presents a few trade possibilites. If SPY gets stronger over the next 3 hours before the open and makes a run at 319, I’m looking at shorting that gap close. If it moves sideways, I’ll be watching Tuesday’s highs around 315.50 for clues and a possible long breakout play to finish the gap close. If 315.50 fails, then price likely just falls back into yesterday’s range for some sideways consolidation and then a late day move down.

 

Important points for SPY today: 315.64 (Tuesday High), 312.70 (Tuesday VWAP), 310.36 (Last Week VWAP), 308.42 (Current Week VWAP) and 307.67 (Tuesday Low).

 

After a very strong run off of Monday’s gap down open, most energy stocks might take a breather today. I’m not really looking to short energy. I’d rather wait and see if we can get a pullback for a few long plays. Just like yesterday, almost all the energy patterns are similar. The core idea today is to see if the energy names fade back and test the breakout points which are around the Monday highs. That breakout point got tested in most names Tuesday morning on that 10:30 sharp dip and the held well. There could be another opportunity to play long again off the Monday highs if the SPY will cooperate and at least stay flat to green today. Also, most of the weekly VWAP’s on the energy names are sitting right on Monday’s highs. For these trades to work, the SPY should be slightly green or at worst just slightly red. If things look really weak today, then none of these trades will work.

 

MPC – Monday’s high was 38.20 and the weekly VWAP sits at 37.90. Look for a pullback to 38.20 for a long attempt and use an area slightly under the 37.90 to stop out. Target 40.50. Same trade for VLO around 64.50.

OXY – Long attempt if there’s a pullback to 19.50 with a stop around 19.25. Target a run back to 20.75. Same play for EOG around 52.75 and COP around 44.

SLB – Long attempt in the 19.30 area with a stop at 19, target 20.50. Same trade in HAL at the 13.25 level.

XLE – Watching the 40.75 area for an early long attempt and not going to give it much room to move against me. Will look for an entry in the 40.50-40.75 area and then use about a 25 cent stop for a possible run back to Tuesday’s highs.

 

If none of the energy names present opportunity, I’ll be back to scalping the IWM. There were a few good short opportunities in it Tuesday, but it was mostly a chopfest. The biggest takeaway from Tuesday was that IWM did manage to close that gap from last Thursday and it never really made any effort to revisit that area before fading the rest of the day. I’m watching for a down open to the 142 area for a possible long play. The upside on that play might be capped at the 8 day ma around 145. If that long play doesn’t develop, then it will be back to the usual short scalps as it could take out the weekly VWAP around 141.50 and then make a run back to the 134-135 lows.

 

There should be opportunity today. I think this market needs to make a choice today about which way it wants to go. Either the big run from the Monday open still has some steam left or it doesn’t, but I don’t see it just moving sideways today. I think we get a tradable direction, although I’m not totally sure which way that direction will be. Stay flexible.

 

 

 

Trading Plan for Tuesday, June 16

I missed all the energy trades from the weekend trading plan yesterday but was lucky enough to catch the IWM reclaim trade for a nice run from 134 to nearly 140. I think there were many frontrunning the FED announcement, but that move from 2.7% down at 4 am to finish the day up about 1% was impressive. I really don’t think it lasts, but still impressive.

 

My biggest concern was the FED announcement yesterday afternoon after the market had already run about 4%. It just seems to be such strange timing. Are things getting so bad behind the scenes that this kind of surprise FED move is needed? I thought we might get a gap down Tuesday, but so far it hasn’t materialized. However, I’m still very cautious today and wouldn’t be surprised to see Tuesday end red. Something strange is going on but I can’t quite put a finger on it. When people appear out of the blue offering free gifts, beware.

 

 

Trading Plan for Tuesday – I’m going to be cautious during the first hour or so and then I’m going to look for a safe place to start building a short SPY position for an afternoon move down. There’s an area in the 312-313 range that could stop this rally. A short entry there could probably work with a small $1 stop. If price takes out 313, then it probably gets back in that gap from last Thursday morning and has room back to 319 and then possibly the top around 323. I’m willing to give it about a dollar around 313, but no more than that.

If I get stopped out of that short trade, then the proper thing to do is probably turn and get long in anticipation of the gap closing to 319. I’ll be using the 312-313 area to stop the long trade.

 

Most of the energy plays from the weekend went as expected. The XOM long off of 44.50 and the CVX play off of 89 worked well. The SLB reclaim trade at 18.50 also worked. The long XLE reclaim trade at 38.71 was a difficult one that worked, but I wasn’t able to take it because the stop on the trade was just too large. The morning low was 37.70 and that $1.00 stop was just too much risk for the available reward of about $1.50. The IWM reclaim trade worked much better because the stop, although still $1.00,  offered about $4 worth of reward. The final reward on the IWM trade was about $6.

 

Almost all of today’s energy trades are the same pattern. Prices in most energy stocks have created a base after the gap from last Thursday. The core idea on trades today is a breakout from those bases back into that gap for closure of the gap and a possible reversal back down. The basic trade is to let each energy stock take out Monday’s high, test that high from above and then bounce in the direction of the gap and create a trend that closes that gap. These trades need to be in the green by 11 am and well into that gap by noon. If these aren’t moving by 11am, then the short SPY situation I described above will probably set in and these energy trades likely need to be exited when they hit breakeven at worst.

 

COG – I’m looking for a long play in the 19-19.25 area on COG Tuesday. It’s an easy stop out if it takes out 18.90. There should be $1.25 worth of reward there.

 

SLB – Watching for price to take out Monday’s high of 19.61 for a long play. Let price take out the high and then come back and test it from above. If it looks like it’s going to hold, then enter with a 25 cent stop and let it get into that gap from last Thursday. The same play works with HAL at 13.30.

 

APA – Long setting up if price can take out Monday’s high of 14.33. (This one took out 14.33 while I was writing the plan, but still watch to see if it tests 14.33 from above and holds)

DVN – Same long play at 13.15.

OXY – Same long play at 19.50.

PE – Same long play at 11.30.

XOP – Same long play at 59.60.

 

Good luck today and be flexible in this market. Things are changing quickly, so don’t get locked into a single directional bias today. Good luck. I check Twitter a few times a day, so always open for questions about the plan.