Oil and Gas Stocks Outlook for Tuesday, November 28
Nov 28, 2017 Trading Blog
It was an ugly day for the XOP on Monday, and Tuesday doesn’t look to be much better. I saw many articles over the weekend saying that whatever OPEC decides at the upcoming meeting, the market will sell off as a result. I think Monday was the impatient and unsure traders trying to be first out the door ahead of the smart money. While is sounds like a prudent thing to do, it probably isn’t the right thing to do. The obvious move is rarely the correct move and the market rarely makes things so clear as to let the novices out the door first ahead of the smart money.
So, if the impatient money is heading out the door incorrectly, what does this tell us about the likely results of the OPEC meeting? It should be a red flag that the current consensus is likely wrong and that the OPEC news might be sold immediately after the decision, however the recovery could be very quick and price could regain it’s upward trajectory in a few days time after the meeting, thereby trapping many incorrect traders, and leaving many more standing at the station, as they impatiently jumped off the train before the meeting.
That is just my opinion of course. Maybe the early traders were correct on Monday by making a quick exit ahead of the consensus, but I doubt it. This now leads to the question of what to do now? I’m looking for the market to go down and take out all the liquidity below the November 15 low of 33.85. We have had 8 days of buying and likely every single one of those buyers has placed their stop just under 33.85. The market will get this liquidity. What it does after grabbing that liquidity is anyone’s guess. I could see this market going as far down as 32, but most likely the down move stops somewhere in the 33 range. There is also a chance that the market goes just far enough to grab all that liquidity and then turns on a dime and rips right back to 37.
At this point, my plan is to scale in to some of my favorite targets starting when the XOP breaks that 33.85 level and continuing as the index drops toward 32. I would become very cautious on any break of 32, as the next level of support is that 30 range. My targets are DVN, COP, NFX, PE, APA, APC and EQT. I will also be watching SLB and HAL, but I’m not as excited about those as I have been in the past. For small caps, I’m watching PES, ECR, NBR, WFT, FMSA, AAV.