Oil and Gas Stocks Outlook for Wednesday, September 6
Sep 6, 2017 Trading Blog
XOP still seems to be in a low volume phase, only about 11 million shares traded Tuesday. I was hoping volume would return a little better after the holiday, but it really didn’t. The range of 87 cents was a bit bigger than normal, but nothing huge.
The morning opened strong with price running right to the 50 day moving average for a quick test, which failed, but at least it tried, which makes a second test likely in the future. After the early test, it was a straight line down to 30.15 where it bounced to end at 30.45. I wouldn’t read too much into the action on Tuesday. The selling volume was light. It almost looked like the buyers pulled back this time as they ran it up to the 50ma, not wanting to push things any further. Much like the last couple of weeks, there really wasn’t much selling.
One concern was the overall market, with the SPY really getting hit. It seemed like oil stocks got caught up in that selling and it is difficult to separate how much of the decline in the XOP was sector related versus macro market related. We should get a better idea with a green SPY on Wednesday.
Wednesday should be more of the same, light volume and smallish range. It appears we might sit in this 29.90-31.00 range for awhile and consolidate. I think some of the hesitation may be due to the EIA numbers coming Thursday, but more of the hesitation may be due to the approaching storms, Irma and Jose. I don’t think the oil ecosystem wants to endure another event like Harvey.
Outlook for Wednesday: Range bound trading between 29.90 and 31.00 for the next couple of days. Until heavy supply shows up, the sector will continue to grind upward. There is no EIA number on Wednesday, it has been pushed to Thursday due to the Labor Day holiday.
Trading Plan for Wednesday: I’m looking to buy the bottom of the range and sell the top. Keep it really simple. I will be looking to enter around that 30.15 low from Tuesday on any light volume test of the lows. First target will be a move from red to green at 30.45. Second target will be a move over 30.70. Third target is the top of the range at 31.00. If we somehow break the lows at 30.15, I’m going to be very cautious. The only thing that worries me are the approaching storms and buyers pulling back not wanting to get involved ahead of that. If the buyers pull back and there is any increase in selling, we could see a drop under 30. The other worry is the SPY, it had a difficult day yesterday and if it starts tanking again, XOP might get overly influenced to the downside.
Individual Stocks: Oil services were hot yesterday on an upgrade. PTEN, NBR, HP, SLB and HAL were the biggest winners with the OIH +2.7%. Refiners had another day of giving back profits with some big drops in HFC -5.8%, MPC -4.6% and PBF -3.5%. The Canadian pair of SU and CNQ seems to be performing a little better than average, possibly because they aren’t dealing with the storm effects, or maybe because of the the basic cost structure of their oil sands businesses. They are worth keeping an eye on.
On my board of the top E&P’s I notice that the top of the board is made up of the E&P’s with international or deepwater operations (HES, NBL, COP, OXY, XOM, CVX) while the bottom of the board is littered with pure US onshore companies (RSPP, NFX, PE, LPI, SM, CPE). Not sure if this is a beginning trend or just something odd today, will keep an eye on that as well.