Oil and Gas Stocks Outlook for Friday, September 29
Sep 29, 2017 Trading Blog
I will be out next week, off for a few days in Bermuda, so no daily energy sector reports.
It wasn’t a great day on Thursday with the XOP putting in an ugly candlestick in the overall pattern. It was the first day where the index couldn’t ride to new highs after a dip. I tried an XOP dip buy at 34.03, but there just never was any upward momentum as the buyers seem to be getting a little tired. Thursday’s action still wasn’t an excess of selling pressure, but more of just a lack of buyers. This may pull back soon, but I really don’t think it will pull back very far without any sellers around. I could easily see one of those minor Fibonacci 38.1% retracements, 50% at the most. The 50 day moving average has now moved up close to 32 and that’s the obvious point for a pullback test.
Outlook for Friday: Unfortunately, I’m looking for an absolutely sideways, small range day and possibly a red day. I think this sector has had a great run, but may be getting tired after seeing yesterday’s action. We could get one early run to test the upside, but I’m guessing that fails within the first hour. The first downside test will be yesterday’s low of 33.85. The next two levels down are 33.63 and 33.39. Worst case scenario for the day would be a test of the lows of the week down around 33.28 and a close of that gap from Monday.
Trading Plan for Friday: I’m probably not doing much today since this market may be a little tired and looking for any excuse to pull back. Buying the dip is a risky play in an overextended market and the odds shift a bit making the risk/reward less attractive. Also, in this type of environment, the down moves can be much faster than normal. Any dip play will have to be extremely well setup intraday with a tight available stop. As for shorting, I’m still not really interested in that approach since I haven’t seen any real selling pressure. Yesterday’s down move seemed more like the buyers stepping back rather than sellers stepping forward. If those buyers suddenly decide to come back, shorts will get quickly crushed. Good luck and see you in a week.