Oil and Gas Stocks Outlook for Thursday, October 19
Oct 19, 2017 Trading Blog
It was another day of consolidation on Wednesday as the XOP moved back down toward the bottom of the 33.25-34.25 range. Volume was average at around 13 million shares. The move sets us up for a test of the lower boundary of the range around 33.
Outlook for Thursday: The move under 33 is what I’ve been waiting for to start in on some swing positions. I’m wanting to see a move under 33 to shake out all the current stops and take the liquidity under the market. This clears out all the weak longs over the market. It would also be nice to trap some shorts, as many will be going short on the break of the lower range. The combination of removing resistance over the market, as well as adding some shorts desperate to cover on a reversal, would probably be enough to start a new leg up in the XOP. The lowest I want to see on the XOP is a test of the 50 day moving average at 32.61. If price breaks that level, then it will probably be time to move to the sideline and be cautious.
Trading Plan for Thursday: Given the above move and stop hunt, the best way to play it is to let the move develop under 33 and then wait for a clear reversal. Next, let the market retest the reversal formation, hopefully on low volume. Aggressive traders will usually start in at this retest point, but I’m going to play it a bit conservative today and let price make the retest and then start up. My point of entry is when price climbs back over 33 for my first entry. I will then add to those positions when price climbs back inside of yesterday’s range, around 33.35. If price can’t hold yesterday’s range, then it is possible that the upmove might fail and I’ll be cautious. As long as yesterday’s range holds, everything is good.
Swing Targets: I will be reaching for DVN first under 35. It sat between 35.10 and 35.30 for most of the day on Wednesday and that will be the price I’ll be watching today. Second on the list is EOG. I tried an intraday trade on it Wednesday, but didn’t have any success as the whole sector just faded. While the trade lost, price didn’t really show much weakness as it drifted for the last three hours of the day. Third on the list is SLB at 65. The chart has some nice structure at the 65 level which make it an easy trade to manage.
A couple of small caps that I want to add on this pullback are PES and ECR. I really wanted ECR on the last sector pullback, but could never get the right price. I really expected it to run past 3 on the last upmove, so I’m not as excited about it as in past months, but I still like the stock and think it can eventually make that 3 mark. WFT, FMSA, PDS and NBR also make nice low priced services stock gambles that could pay off with big percentage moves. Some low priced E&P names for big percentage moves include OAS, SWN and AAV.