Oil and Gas Stocks Outlook for Thursday, October 26
Oct 26, 2017 Trading Blog
Wednesday was not a very positive day for the XOP or the SPY. We had the big XOP drop on Monday to the 50ma, a fight to regain the 50ma on Tuesday and then just a complete failure on Wednesday where we closed below the low from Tuesday. At least the index attempted a rally on Wednesday, it could have been a much worse day. The volume was a little above average on Tuesday (16.4m) and Wednesday (15.3m), but nothing really huge. The SPY closed below the 8 day ma on Wednesday, which could signal further downside if it doesn’t reclaim back above it quickly today.
At this point, it looks like the trend has changed for the next bit and we may be looking at a pullback. I see this as an excellent buying opportunity, so long as the SPY doesn’t totally collapse and take out the 50ma. The first support for the XOP should come in around 31, if we even make it that far. If I had to draw the perfect bottoming pattern in the bigger picture, this pullback would be part of it. I wouldn’t start to have any real concerns about a bigger downtrend change until we got closer to that 29-30 range.
I’m not a huge believer in Fibonacci retracements, but I will pull them up from time to time out of curiosity and right now if we consider the bottom at 29.00 on August 28 and the top at 34.69 on September 28, yesterday’s low was exactly a 50% retracement of that move off the bottom. The 61.8% retracement level comes in at 31.15.
XOM is still holding above the 8 day moving average and will be a big focus today. If it can hold that 8 day ma, it could make a run back toward 84 and take the XOP with it. However, if it gives up that 8 day ma, the first support doesn’t really come in until the 50/200 day combo down around 81.25. CVX put in a lower high yesterday and gave up the 8 day ma.
Outlook for Thursday: We are going to get either a retest of the 50 day moving average up at 32.63 or a retest of yesterday’s low of 31.81 that formed the low tail of Wednesday’s hammer candlestick. Honestly, I have no idea which way this is going, but those are the two biggest magnets today. If I had to choose, I’d say we get a test of the 50ma before starting down again. If we can somehow regain the 50ma, we would then need to close above the 8 day ma at 32.91 to get this trend turned back up. I don’t really see it today, but it could happen.
Trading Plan for Thursday: 32.50 is the level I’m watching for my first trading point. If we can hit that mark and we form some type of lower high pattern, I will have no problem taking this market short for a run under 32. If we get an opening dip down to yesterday’s low, I’ll be looking to give the market a shot long off that point on the right low volume, higher low setup. It is one of those days where you just have to take what the market gives you and go with it. It feels like we are due for a bounce, so the long position is my preferred choice today.
Individual Stocks: I picked up NBR yesterday at 5.96 and had a plan to add more around 5.58, but price never got down to my second add. It had a nice recovery and I’ll be holding this one to see how far it can bounce off of yesterdays reversal. I’m watching DVN today to see if it can regain the 50ma. If it can get back above it, I might start in long using the 50ma as my stop. It will be a smallish starting position because if price fails at the 50ma, the next move is down sharply. PE is also a target and should put in a bounce soon for a 2-3 day swing trade. EOG will soon be a long as it seems to be the strongest energy stock of the bunch. Any break above the current 95-97 range there is a buy. Also watching for a drop in PES and ECR for long positions, but really need more of a deal than what they currently offer.
Be careful out there, the SPY and XOP are both looking a little shaky. Use stops and size positions correctly to control the downside.