Oil and Gas Daytrading Scans for Tuesday, July 28
Jul 27, 2015 Oil Stock Scans
Another ugly day in the energy sector which provided very little opportunity for the long side traders. Yesterday’s scan picks CAM and EQT were tradable, but RIG, MPC and NFX all ran straight down and never provided an entry point, which was probably a blessing in disguise.
I really like the action in natural gas stocks, specifically EQT, which finished up nearly 2% on solid volume of 3.1 million shares. It will be on my watchlist tomorrow for more movement upward.
Quite honestly, there isn’t much to trade from the long side tomorrow without a big overall bounce out of the sector, but here are a few ideas:
Halliburton (HAL) – Halliburton seems to be basing out here at 40, putting in three tests of that level this month. I’m looking for a weak open on Tuesday to provide an entry point close to 40. If I can get something in the 40.25 -40.50 range, then I’ll risk 50 cents stopping it at 40.00, with the upside of possibly $1.50 if it can take out Monday’s high. Great risk to reward trade on a great company.
Kinder Morgan (KMI) – Kinder Morgan had a great day on Monday in a very weak market, which shows improved relative strength. Behind that strength may have been rumors of insider purchases. While I’m not sure that was the entire reason, there is no denying that the stock put in a bottoming candle on big volume of nearly 19 million shares. I’m looking for some opening weakness to get a position playing long against Monday’s low for my stop. Looking for follow through back to at least the 8 day moving average around 36, and possibly the 21 day moving average near 37. Again, this is all about relative strength and finding stocks that are stronger than the overall sector, so that when the sector turns up, these stocks are on the top of our buy list.
Phillips 66 (PSX) – I’m a huge fan of playing stocks bouncing off their 200 day moving averages, and as you can see in the above chart, PSX is sitting right on the 200 ma. While this is no guarantee that a stock will go up, what is does provide to a trader is a great spot to put on a very defined fixed risk trade. When the 200 ma doesn’t hold, you know you are wrong and it is easy to bail out. For PSX, I’ll be looking for a good entry on the open and stopping it if the 200 ma breaks or the stock takes out Monday’s low. Try to work the entry into a situation where the risk is a quarter and the reward is upwards of a dollar.
Enservco (ENSV) – Enservco is a very low float stock which has dropped from 1.50 down to near $1.00 in the last couple of weeks on no real volume. I picked up some of this today at $1.02 and intend to hold for the ride back to $1.30-1.50. If it dips again tomorrow, I will add more. This is more of a swing trade than a daytrade. Had the volume on the decline been large, I wouldn’t be trading this, however this seems like a situation where the stock has just been caught in the overall downdraft due more to bids being pulled than actual stock being sold. When the buyers come back, so will the bid and it will move quickly.
US Silica (SLCA) and Emerge Energy Services (EMES) – These are two fracking sand companies that have very similar charts, with both putting in green days on Monday. Look for follow through in this particular theme and chose either stock for continued upside.
That’s pretty much all I see for tomorrow that is attractive. About 75% of the oil and gas stocks show the same pattern of a steep decline with either a red candle or a small green doji candle on Monday. This means that the downward momentum has slowed in some stocks, but if you are playing any of those patterns you are trying to catch a falling knife. Be careful out there, these stocks can keep falling.