Oil and Gas Stocks Outlook for Wednesday, September 13
Sep 12, 2017 Trading Blog
Some days in trading just don’t go well, and Tuesday was one of those days for me. I missed a nice trade and run up to 31.15, but did manage to get a good price for my longs that I was holding from last Friday. For whatever reason, I just wasn’t feeling it Tuesday. The run up was definitely not what I was expecting in my daily plan and was not how I was seeing the market. I’m not sure what caused the run, but I had no confidence in it and decided to stick with my plan and therefore called it a day around lunchtime.
The market did come off a good bit after lunch, but some of that may have been due to the comments from Jim Chanos about Continental Resources. I’m not sure he really said anything that I haven’t read many times already across the internet. Realize that he isn’t telling us this stuff and then going out and shorting. He already has his position, and has likely been in it for months already. Don’t think that this is some super secret information and decide to follow him in short, because if you do, you are way late to the party and you are probably providing him shares so that he can cover and get out leaving the late entrants holding the bag. It always amazes me how many people will follow guys like Buffett or Chanos into positions without realizing they took positions a long time ago and are likely using the media to drum up suckers to dump their position on. This might hang over the sector for a day or two, but I wouldn’t worry too much about it. Also, this is the same guy that was shorting CAT, and you can see how that worked out for him. They aren’t always right, just look at Bill Ackman.
Outlook for Wednesday: The Tuesday afternoon API number wasn’t too bad at +6.2 million build for crude. Who knows what the EIA number will show tomorrow at 10:30, but I think it would have to be over +10-12 million to get anyone’s attention. XOP didn’t show any reaction after hours. Technically, today was solid with good volume (19.1 million shares) and good range (93 cents).
I had two major concerns about Tuesday: 1) We failed right at last weeks high of 31.17, topping out at 31.16, and 2) we once again failed on the test of the 50 day moving average at 30.90, closing at 30.83. We weren’t too far below it, so we still have a chance for another test Wednesday.
Trading Plan for Wednesday: The ideal setup for a trade tomorrow would be to have a really outrageous EIA number that really tanks the market and then go in and find a safe spot for a long play back to 31.00. It would be helpful to find an entry close to 29.90 to use as a stop. Anything in the 30.10 range would be a great entry for a long.
The worst case trading scenario would be if this uptrend is to continue, I think we could possibly be looking at 2-3 sideways daily bars of narrow range and low volume, which would produce some consolidation here at the 50ma and the August highs which leads to a breakout after some buildup.
Most likely, we will get something in between the two plans above. I’m out of the market until after the 10:30 EIA number, but after the release I will be looking for some place to get long for another test of the highs at 31.16. There needs to be 40-50 cents reward on the trade with a risk of less than 15 cents. Wherever I can find a spot that meets those parameters will probably be a worthwhile trade. I’m not interested in shorting Wednesday. Good luck.