Oil and Gas Equities Outlook for Thursday, January 18, 2018
Jan 18, 2018 Trading Blog
It was another meltup day for the SPY, and it pulled everything up with it, including the XOP. Yes, this market is overbought, but that doesn’t mean that it can’t keep going up. Things can go much further than you think.
Luckily, I covered my short trade from Tuesday on the open yesterday at 39.02 for a 73 cent profit. It didn’t look like a good decision at first, but once the buyers stepped up, the market was a steady climb all the way to 39.65, which was about 10 cents from my entry. I also put on another short position at 39.40 on what looked like a great situation, but I got stopped out of the trade at 39.58. The market finally rolled back down to 39.33, proving me somewhat correct, but it was too late and the damage was already done. Sometimes that happens, but sticking to your stops is always the best course of action. Had the SPY not been grinding to a 1% gain on the day, I think that short position would have had a real chance at being profitable. But maybe I can put it back on today.
Today’s EIA number will be out at 11:00 am EST. The API number was a decent draw, so the market is likely expecting a good number. Who knows what the market reaction will be to the number. I feel like I could know the number in advance and it probably wouldn’t help me, as gauging the market’s reactions in an overbought condition is nearly impossible. Whatever the number, it should provide a good opportunity for a trade.
Outlook for Thursday: The late selloff in the XOP around 3pm was very strange, especially after the continuous grind up. I’m not sure what to make of that, but Wednesday’s high of 39.67 will be the point to watch today. 39.71 is another good road sign, as it is 1/2 ATR, so it will take above average momentum to clear that level. The sellers showed up in that area with some volume and could do so again today. If the sellers don’t show, price should easily cut through that level and make a quick run at 40. On the downside, I’m looking at that 39.12 level again for support and 38.95 is 1/2 an ATR on the downside to gauge momentum. If price cuts those up easily, then the next level down is yesterday’s low at 38.76.
I’m willing to trade either side today, but I’m still leaning countertrend and favoring a short trade today after the EIA number. I’d like a clear failure of yesterday’s 39.67 high and see if I can get an entry short on any stop hunt above that level. That is probably the only short location that I’ll consider today.
For a long trade, I’d like to see a quick move down to test the 39.05 level. I’d enter the 39 area long and use 38.85 as the stop. If price stays in no man’s land between 39.15 and 39.55, I’ll be sitting on the sideline, at least until after 11 am.
Individual Stocks: I missed the XOG trade. Tried to be too exact and ended up missing a nice 13.65 entry point. I really thought it was set up to gap down Wednesday morning, but I guess I wasn’t the only one sitting and waiting on this stock, as it had a nice 5% run for the day. As for everything else, I may be totally incorrect, but I think it is just the wrong time to jump into swing trades. I see people going in heavy on the long side the last couple days, but I think those entry prices are going to look really expensive in a few weeks. I don’t know other traders’ timeframes, but being patient and waiting for the pullback could really pay off big here. Or you could miss it like I did with XOG, you just have to recognize the risk/reward dynamics and go with what fits your timeframe and system.