Oil and Gas Equities Outlook for Thursday, February 1, 2018
Feb 1, 2018 Trading Blog
Not much action on Wednesday after a sizable build on the EIA number, but the index held up pretty well hanging around the Tuesday lows of 36.76 for most of the day. It seemed like a bit of consolidation going on, but no real bounce to speak of. The SPY wasn’t really helping yesterday either, as it seemed like every time the XOP built up some momentum, the SPY would pull back.
I purchased more JAG and am almost full on that position with an average price right at 13. I’m full on PE and haven’t added, but I have been tempted with price dropping to 23.35. If it takes a dip Thursday, I might add a little just to bring the average price down, but will more likely just wait for it to hit bottom with some type of selling climax and then try to add when it turns back up. There were some really huge chunks hitting the tape in the 23.40 area on PE, so keep an eye on that level.
ECR came right down to the 2.13 mark where I figured it would stop. I’ve still got an order in at 2.03, hoping that it will have some type of crazy overreaction like a few other stocks have done. I really have to be patient with that one and get a good price because those low priced stocks really eat into my buying power since they are non-marginable. One other small natural gas play that I have an eye on is AAV. It is a small Canadian producer that I would be willing to buy under 3.
Outlook for Thursday: So far we are holding this 37 level pretty well, but I think today will tell a lot. Was yesterday’s low range simply a consolidation on the road to lower prices OR was the small range a bottom with the bears unable to make any further progress leading to a turnaround today and a move back toward 38? That is the question. I’m watching Wednesday’s low of 36.57 to see if we can hold yesterday’s range for a possible bounce. If 36.57 range breaks and we fail a few tests to get back inside it, then we go lower still until we find a fair value area.
One curious thing from Wednesday is that we failed on the upside right at the 50 day ma which sits at 37.19. That area was also a big resistance during Tuesday’s tumble. It also represents Wednesday’s high (37.21) and the upper side of the range. That is the level which will cause the most trouble on the upside. If price can break that, then there is a fairly large liquidity gap all the way back to 38.
I’m looking for an early test of that 37.21 point and probably a failure for another run at the lower side of the range. I would be surprised if it breaks out above that level on the first try, but it definitely could. The other possibility for Thursday is that we make an immediate run for the lows to test that side of the range and then bounce for either a consolidation or a run at the top of the range at 37.21. If the lows hold around 36.57, I’d really like to take a shot long for the day. I’m not really interested in trying to play a short on a failure up at 37.21 because risk is just too hard to control there. If it breaks the top of the range, it could spike so quickly that the loss on a short could be larger than expected.
Good luck and play safe.