Oil and Gas Stocks Outlook for Friday, September 15
Sep 14, 2017 Trading Blog
It looked like a great trading day setting up, but it just kind of fizzled out and fell into a tight range from noon until the close. I managed to catch a move from 32.00 to 32.18 early, but that was pretty much the extent of my day.
Even though it wasn’t a great trading day, the action was just what we wanted to see to keep this energy sector rally going. Today felt like a day of consolidation with price hovering all day above yesterday’s close, with just a few moments in the red around 1:00 pm. I’m actually a little surprised that we didn’t make more of a run back down to test the 50 day moving average, but the market was strong enough to resist that down move. Volume was a decent 17 million shares and the range was 75 cents.
Unfortunately, I spent much of the morning following the XLE rather than the XOP because Interactive Brokers had some kind of problem with XOP quotes. Not a huge issue, as they move almost in sync with each other, just a personal preference and habit of following the XOP. It actually made me realize that I have become a little too narrowly focused on E&P and have been missing some opportunities in the Services, Drilling and Refiners. I’m definitely going to have to start watching those again now that the nine month energy decline seems to be turning.
Outlook for Friday: The XLE and XOP are in a little different positions right now. The XLE ran right into that late July supply zone at 67.00, however the XOP hasn’t quite made it back up as far. The refinery aspect of XOM and CVX, combined with the service components in the XLE have kept the XLE a little stronger.
I expect that we probably get another day of consolidation or possibly a bit of a down move on Friday. That wouldn’t be a bad thing though, it is always good to rest after a big run up and get ready for the next leg. The real issue tomorrow is how far do we pull back? Are the buyers strong enough to step in forcefully near the 50 day moving average around 31? The 8 day moving average is almost in the exact same spot. There is also a diagonal downtrend line running from December that hits very near 31, maybe just a little above in the 31.25 area. There are plenty of things to act as support on a pullback to 31 and I feel safe looking for some swing longs there. I definitely don’t want to see this market give up much more than 31.00 on the downside. It would be really encouraging if we could put in a very small range candle here and not give up anything in price.
I really have only one concern right now and that is the SPY. It has moved sideways for the last three days in a tiny range and it had a higher than average volume day Thursday, but couldn’t make it any higher in price. It seems like there is some fairly large supply over the market here. The SPY rolling over is the one thing that could derail energy right now. I’d like to see SPY grind up to some new highs on Friday, but most importantly I don’t want to see it put in some kind of very ugly candlestick that we will have to deal with next week.
Trading Plan for Friday: I’m probably going to be an observer on Friday, just watching to see where we find support on any move down. I think we may be capped for just a few days on the upside, as we have come pretty far in only a few days. I’m not excited about getting long in a market that is stretched right now, especially on a Friday. If the pullback long setup is excellent, I’ll take it, but I’m going to be very picky on Friday. If we do somehow get down to 31.00, I’m going to be starting in long on DVN, RSPP, PE and APA. My second tier list is NBL, NFX and CLR. I’d probably be willing to take about 20-30% of what I want on a pullback tomorrow and then start adding to those positions on Monday on any further weakness.