Trading Plan for Tuesday, June 16
Jun 16, 2020 Trading Blog
I missed all the energy trades from the weekend trading plan yesterday but was lucky enough to catch the IWM reclaim trade for a nice run from 134 to nearly 140. I think there were many frontrunning the FED announcement, but that move from 2.7% down at 4 am to finish the day up about 1% was impressive. I really don’t think it lasts, but still impressive.
My biggest concern was the FED announcement yesterday afternoon after the market had already run about 4%. It just seems to be such strange timing. Are things getting so bad behind the scenes that this kind of surprise FED move is needed? I thought we might get a gap down Tuesday, but so far it hasn’t materialized. However, I’m still very cautious today and wouldn’t be surprised to see Tuesday end red. Something strange is going on but I can’t quite put a finger on it. When people appear out of the blue offering free gifts, beware.
Trading Plan for Tuesday – I’m going to be cautious during the first hour or so and then I’m going to look for a safe place to start building a short SPY position for an afternoon move down. There’s an area in the 312-313 range that could stop this rally. A short entry there could probably work with a small $1 stop. If price takes out 313, then it probably gets back in that gap from last Thursday morning and has room back to 319 and then possibly the top around 323. I’m willing to give it about a dollar around 313, but no more than that.
If I get stopped out of that short trade, then the proper thing to do is probably turn and get long in anticipation of the gap closing to 319. I’ll be using the 312-313 area to stop the long trade.
Most of the energy plays from the weekend went as expected. The XOM long off of 44.50 and the CVX play off of 89 worked well. The SLB reclaim trade at 18.50 also worked. The long XLE reclaim trade at 38.71 was a difficult one that worked, but I wasn’t able to take it because the stop on the trade was just too large. The morning low was 37.70 and that $1.00 stop was just too much risk for the available reward of about $1.50. The IWM reclaim trade worked much better because the stop, although still $1.00, offered about $4 worth of reward. The final reward on the IWM trade was about $6.
Almost all of today’s energy trades are the same pattern. Prices in most energy stocks have created a base after the gap from last Thursday. The core idea on trades today is a breakout from those bases back into that gap for closure of the gap and a possible reversal back down. The basic trade is to let each energy stock take out Monday’s high, test that high from above and then bounce in the direction of the gap and create a trend that closes that gap. These trades need to be in the green by 11 am and well into that gap by noon. If these aren’t moving by 11am, then the short SPY situation I described above will probably set in and these energy trades likely need to be exited when they hit breakeven at worst.
COG – I’m looking for a long play in the 19-19.25 area on COG Tuesday. It’s an easy stop out if it takes out 18.90. There should be $1.25 worth of reward there.
SLB – Watching for price to take out Monday’s high of 19.61 for a long play. Let price take out the high and then come back and test it from above. If it looks like it’s going to hold, then enter with a 25 cent stop and let it get into that gap from last Thursday. The same play works with HAL at 13.30.
APA – Long setting up if price can take out Monday’s high of 14.33. (This one took out 14.33 while I was writing the plan, but still watch to see if it tests 14.33 from above and holds)
DVN – Same long play at 13.15.
OXY – Same long play at 19.50.
PE – Same long play at 11.30.
XOP – Same long play at 59.60.
Good luck today and be flexible in this market. Things are changing quickly, so don’t get locked into a single directional bias today. Good luck. I check Twitter a few times a day, so always open for questions about the plan.