Oil and Gas Stocks Outlook for Tuesday, October 10
Oct 10, 2017 Trading Blog
Monday was an extremely boring Columbus day muted session with the XOP putting in a small 36 cent range with only about 7 million shares traded. Even though the action was very slow, there were still obvious clues to be had regarding the direction for the rest of the week.
The SPY had a tough day on Monday and put in a very ugly three candle topping pattern over Thursday-Friday-Monday. It will be interesting to see if it follows through today. Even with that down SPY action, the XOP held in there and didn’t give up much ground, which leads me to believe that there may yet be another leg up developing. We made a weak attempt at a reclaim of the 8 day moving average at 33.87, but couldn’t get above it. The thing that really stands out is that once this test failed, we didn’t just roll over and dive. The index instead dipped and then flattened showing there were some buyers underneath.
XOM also makes me think there may be some room to move up in the XOP. XOM closed above the 200 day moving average on Monday and spent most of the day trading green when the SPY was trading red. The relative strength compared to other sectors was there. If XOM can take out 82.45, we could see a rally in the XOP.
Outlook for Tuesday: Given the above, I’m looking for a green day for oil and gas stocks on Tuesday. I will be keeping an eye on the SPY for overall direction and that $50 mark in oil. On the upside, the 200 day moving average comes in at 34.99, while the high mark in prices right now is 34.69. Both of those levels should provide some resistance. On the downside, I will be watching Monday’s low of 33.45, last week’s low of 33.25 and the gap from 33.00.
Trading Plan for Tuesday: I’m looking for an early dip to find a place to get long. The ideal spot would be near Monday’s low of 33.45 for an entry and stop, and looking for a run up toward the 8 day moving average. (Edit: checking in this morning, the XOP is already trading at 34 and that changes last night’s plan. Given that we are now looking at a gap up to 34, what I want to see is a test of the 8 day moving average down at 33.87 and possibly a close of the gap from yesterday’s high of 33.81. If we can hold that level, I will be looking to play long there using the 8ma as my stop. If we get back below 33.81 and get stuck in yesterday’s range, then we may be looking at a red day. Everything will depend on how much strength the buyers have to keep price out of yesterday’s range.)