Oil and Gas Stocks Outlook for Wednesday, September 20
Sep 20, 2017 Trading Blog
It was another day of consolidation on Tuesday and a terrible day for daytrading. I had only one trade setup that I posted on Twitter, but it never triggered an entry. It was great action for the health of the current trend though, with a 34 cent range and 14 million in volume.
The most important thing about Tuesday was the action that occurred around 12:45 pm. There was a big spike down on heavy volume taking price down to the 32.00 level. The instant that volume ended on the selling climax, price bounced, and it kept rising for the next three hours. There was a nice trade setup on the retest of that selling climax, and I really thought about trying a long here, but I didn’t see enough reward to justify the possibility that we might make a run at 31.50. The strong move back up after the selling climax is a clear indication that there just aren’t any sellers around. We have been dealing with this absence of sellers for 5-6 weeks now. I expect that if the buyers are going to get their orders filled, they are going to have to take this thing up toward the top of the range to find sellers. Pure auction theory.
Outlook for Wednesday: Today has two big events, the EIA number at 10:30 am and the FED announcement at 2:00 pm. The API number was good on Tuesday afternoon, but I don’t think it has any relation to the real number from EIA today. There could be a surprise build. I don’t think it will really matter though. If there is a surprise build, price will dip and be bought heavily. If the number is solid, we probably make a line straight for 33.00. Either way, the line of least resistance is up. This sector is strong right now and I don’t see any supply overhead that is going to slow this thing down. I would be surprised if big sellers stepped in here, as I just don’t see any signs of sellers anywhere in this area. We probably should have already retraced to the 50 day moving average by now, and the fact that we haven’t, further suggests that this market is stronger than average.
Trading Plan for Wednesday: My plan for today is to hope for a bad EIA number and simply buy the dip. Anywhere between 31.50 and 32.00 would probably be an acceptable area to try a long after the EIA release. Closer to 31.50 is preferred. The only concern I have right now is that our reward is getting smaller as we get closer to resistance at the top of the range around 33, while our risk gets bigger, as we could easily pull back to the 50 day moving average around 31. The one thing I don’t want to see today is a big gap up on the open, that would leave us in a very difficult risk/reward situation for most of the day and could be just the move to draw out some sellers. Let’s hope for a flat open, flat first hour of trading and a bad EIA number which produces a buyable dip.
Individual Stocks: Three of my favorites, APA (-1.3%), DVN (-.6%) and PE (-1.5%), were the three weakest stocks on my board yesterday. The plan remains to buy these when XOP pulls back to the 50 day moving average. OAS at 8.58 is pulling too far away from the buy zone now. It was my favorite speculative play and I’m hoping it will slow and pullback toward 8.00 for an entry. As discussed on Tuesday, XOM remains the key to watch. It has setup with a nice tight range from 80-80.25 and I will be watching that one for a breakout to the upside today. The stop on that trade will be just under 80.