Very interesting long-term chart for WTI crude...

Clearly, a huge triangle consolidation building in crude since 2011.  Question is, when does it break? And will the move be higher or lower?

I find it interesting that crude is still trading in the mid-$90 range even though US inventories are at record levels, Fed is rumored to start winding down QE soon (I personally don't believe they will), and the US Dollar is surging.

What are your thoughts on where WTI should be priced?  What does the chart above mean to you?  Personally, I think crude is on the verge of making a VERY big move!

Use the comment section below tell me what you think...

Spanish bailout news points us towards a strong open for energy related stocks tomorrow.  Crude futures are already up 2.2% as I write this Sunday evening.  The RSI divergences I pointed out in the last post are also showing up in some of the big energy ETFs like XLE, IEO, OIH.

Take a look at IEO...

As you can see, IEO made a lower low in price but the RSI did not confirm the new low as it made a higher low.

What's it mean?

Downward momentum for IEO is losing steam and a reversal to the upside should be coming our way soon.  What's more, as long as the Spanish bailout goes through, I think now's a great time to add some undervalued energy names to a portfolio.  I added APA last Thursday and Friday and I remain long GPOR, NOG from last month.  I'm on the lookout for more trades and you'll see them posted soon!

UPDATE June 11th: Traders used the strong opening as a selling opportunity.  Oil dropped 5 points from the pre-market high to the close, a huge down day by anyone's standards.  Today's price action was abysmal across the board and I think lower prices for oil and the S&P 500 are now in the cards.  I will be a seller of $APA if we get downside continuation tomorrow. 


UPDATE June 14th:  Choppy action for the broad market this week.  However, APA is screaming today after a bullish operations update this morning.  I remain long APA from $83.50.

NOG and GPOR are hanging in there today but both stocks are still stuck in a brutal downtrend.  My position size in NOG and  GPOR is relatively small so I am willing to take some heat on these stocks.  Both stocks offer considerable value in the US onshore oil E&P space.

For the better part of the past two weeks I have been largely in cash.  I have taken a few small long side risks, but not much to speak of. The big sell off in oil was a major headwind for E&Ps in recent weeks and there was no sense fighting it.

But now I'm seeing a lot of promising technical long setups in energy names starting to pop up.  Most every opportunity I see right now is a positive RSI divergence with a V-bottom in the ADX.

Here's an example...

Apache (APA) has made a lower low over the past few days while the RSI at the top of the chart has not. This signifies downward momentum coming to a close.  The red lines in the chart above show the divergance.

Also notice the ADX is above the red -DI line (green circle).  This means the recent downward trend is overextended and likely reverse course in the near future.

I have not established a position in APA yet but I will let you know via Twitter when I do.

With oil near $85 a barrel I feel much more comfortable taking long side risk in oil names.  More stocks with this same setup are GPOR, OXY, and OAS.

UPDATE June 10: I added a position in APA on Thursday and Friday. My average buy price is $83.50.




Disclosure:  I am long GPOR and APA

Market update May 15, 2012

Another rough day for energy stocks as a whole today.  Oil E&Ps, along with oil service names performed poorly relative to the broad markets, which also had a lousy day.  Bottom line, there's no point in trying to be a hero in the market right now.  Unless you shorted last week, there's really no play on energy stocks.  I am holding a few of the technical trades from recent weeks (HEK, MCF and REXX) but for the most part I'm largely in cash.  I will remain so until I see I high volume bullish reversal in XLE, IEZ, and IEO.  Until then, I will be safely on the sidelines.

Here's a quick technical look at XLE:

As you can see, XLE has clearly broken trendline support (red line) and is now in freefall.  The next downside target is the $64 area, and then $62.  If heck really breaks loose in Europe we could see last year's lows of $56.  I don't think that will happen, but I'm not ruling it out either.  At any rate, we have some fantastic buying opportunities setting up in energy names.  Just be patient and let the market find some support before jumping in.

Remember, just because stocks are cheap, doesn't mean they can't get cheaper.  Always use stops to protect your capital.

Crude Market Technical Update May 6th:  WTI broke through important trendline support at the $103 area late last week.  That break led to a big sell off on Friday with crude closing at $98.65.  The next area of technical support is the green trendline (support 1) at the $97.50.  We should see some sort of bounce at that level.  If not, the market is likely moving to the lower green trendline (support 2) at $92.50.  

UPDATE May 15:  Crude remains in freefall and looks as though it will test support #2 and $92.50 soon.  Once oil drops into the $85-$90 a barrel range I will become more willing to take long risk in oil names.

disclosure: I have no position in crude futures or ETFs.

Energy Stock trading plan for the week: Monday morning will likely be a gap down morning for US markets.  The first 30 minutes of trading will likely set the tone for the rest of the day.  I am watching a number of promising technical setups closely, but don't have new trades for you right now.

I don't think the correction we've seen over the past few days is over quite yet.  We'll likely see lower prices for energy stocks in coming days.  Keep your cash levels high for now and be ready to pick up some screaming deals later this week!

Watchlist Addition May 4th:  Heckmann (HEK) This stock has been demolished over the past 5 months.  But now that the stock has tested the 2010 lows of $3.60 (green line) and the weekly ADX line is showing extreme over sold readings (red circle) now's the time to start accumulating HEK.  What's more, the company reported earnings above analyst expectations last night.  They also raised their 2012 revenue guidance.

UPDATE May 15th:  I remain long HEK with an average cost basis of $4.00.  I'm holding with a stop below the recent lows of $3.50.

UPDATE June 10th:  Sorry, late post- stopped out HEK at $3.50.

disclosure: Long HEK, My average cost basis is $4.00.

Watchlist Addition April 29th: Contango Oil and Gas (MCF)  MCF is a Gulf of Mexico oil and gas producer.  Notice how the stock is near the bottom of range.  I am watching this name for upside in coming weeks.

UPDATE May 1st:  MCF triggered a long entry at $54.63 this morning.  

UPDATE May 15th:  MCF has remained remarkably resilient to the drop in broad markets in recent days.  I remain long this name.

UPDATE June 10th:  I remain long MCF.

disclosure: I am long MCF

Watchlist Addition April 29th: Westport Innovations (WPRT)  WPRT is a natural gas engine maker who's stock has sold off hard in recent months.  The shares bounced off the $30 support level on Friday and may have more upside in coming weeks.

Update May 5th: WPRT rejected the 200 dma yesterday.  I closed my position for a small loss.

disclosure: position closed

Technical Alert April 18th:  Rex Energy (REXX) This gas heavy E&P company has been take to the woodshed in 2012.  But at $9 the stock is woefully undervalued and due for a bounce.  The 2010 lows are at $9.00 (green line) and we could see a bounce off this support level in coming weeks. 

UPDATE April 23rd:  Bought REXX long at $9.45 

UPDATE April 27th: I remain long REXX from $9.45 and will add on any weakness.  Stock broke above $10 yesterday.  This could be a huge trade if nat gas prices hold onto their recent gains.

UPDATE May 1st:  REXX is breaking to the upside ahead of earnings tonight.  I am holding my long position through this earnings report.

disclosure:  long REXX

Technical Alert April 18th: Pioneer Natural Resources (PXD) is holding a strong uptrend (bottom green trend line).  Also notice how the stock has been consolidating since mid February.  Low ADX means this stock is ready to break into a new trend.  Given the strong uptrend I think the next move is higher.

UPDATE April 27th:  PXD is making a solid move higher out of the consolidation I pointed out on the 18Th.  I suspect PXD will test the $120's in the near future.

disclosure: No position yet

Technical Alert April 18th: Halliburton (HAL) oil services company reported earnings this morning well above analyst estimates.  Also notice how the stock is coming off multi-month lows (bottom green line).  Profit target is the upper green trendline and 200 dma.

UPDATE April 27th:  I remain long HAL.  stock is chopping around in the $34-$33 range.
UPDATE May 1st:  I added more size to my long HAL position today.
UPDATE May 15th:  HAL has broken through support at $32.00 and looks ready to test $30.00 tomorrow.  I sold half this position yesterday to lighten up and plan on buying back in at $30.00

disclosure: I am long HAL

Crude Technical Alert April 10th:  WTI dropped below $101 today and looks like it will test $100 either tomorrow or the next day.  Do you think it will break below $100?  Personally, I think we get a bounce.  Whether we hold above $100 in the long run depends on the strength of the coming bounce. 

Also note... very important global meeting with Iran this weekend.  Fireworks will fly if the meeting doesn't go well...

UPDATE April 12:  Crude bouncing ahead of weekend meeting with Iran.  Pivotal time for oil prices...

UPDATE April 17th: WTI has rallied back over $104 on the bounce...

UPDATE April 18th:  WTI dropped on a larger than expected inventory build...

Have any thoughts on the direction of oil prices? Post them below!

Popular question concerning natural gas prices:  Prices are so low ($2.03 today).  How much lower can they go?

Answer: the US is expected to run out of storage space for nat gas this summer.  Once that happens, I think we will see a capitulation in nat gas.  But that capitulation could come at much lower prices.  It's not out of the question for nat gas to trade at $1.25-$1.50 this summer.

UPDATE April 17th:  Nat gas broke below $2.00 today...

What are your thoughts?--- post in the comments section below...

Watchlist Addition April 10th:  Northern Oil and Gas (NOG): Here's a great Bakken producer with an efficient non-operator model.  Shorts have taken control of this name over the past few weeks, but its starting to show signs of life at the $20 support area.  Notice the falling wedge, and also notice the ADX rising above the -DI line (red circle).   This is a classic v-bottom setup.  No entry yet, but I am keeping a very close eye on it.

UPDATE April 12th:  Added to my NOG position at $20.50 this morning.

UPDATE April 17th:  NOG took a dive yesterday along with other oil and gas names.  I lightened up my position at a small loss, but I am still holding a core position from $20.90.  Patience on this one... 

disclosure: I am long NOG from the $21 area.

Energy stocks are getting smoked over the past few days.  However, the receent sell off is creating some very good buying opportunities.  Best to keep cash levels high for now and stalk low-risk/ high-reward trades.  I will post them as I see them....

Watchlist Addition April 4th:  Devon Energy (DVN) - Pullback to MA support after a high volume breakout a few months ago.  For an aggressive entry buy now.  For a more conservative entry wait until a break above the red resistance line at $73.00 for entry.  Company just announced they're increasing cap-ex spending by $1 billion for 2012.

UPDATE 4/10:  DVN broke below support on the broad market sell off today.  If you took the aggressive entry at the trendline support on April 4th you should have closed the trade for a small loss today.  Still a good long opportunity, but wait for a better setup.  I will be revisiting this one soon.

disclosure: no position in DVN yet.

Watchlist Addition April 3rd: Northern Oil and Gas (NOG) - Watching for a breakout above $21.25.  Notice the price compression on the hourly chart.  Low ADX reading means big price movement coming soon.  This is an aggressive trade because NOG is in a short-term downtrend.  But with the high short interest in this name it could get a nice short-covering pop.

UPDATE 4/4: Broke below support on weak broad market open and falling oil.  Breakout above $21.25 didn't happen, so no entry on this pattern yet.  Will keep watching.

disclosure: I am long NOG

Energy stock technical pattern watchlist for April 2nd, 2012

LNG:  Bull Flag- watching for a breakout above $15.00

UPDATE 4/3: Long from $15.10 and holding

UPDATE 4/5: Broke over $16 today and testing recent highs at $16.50

UPDATE 4/10: CLOSED LNG LONG TRADE @ $16.00

FSYS:  Bull flag- Buy the bottom of the flag now, or wait for a confirmed breakout above $28.00

UPDATE 4/2: FSYS broke below support today. Pattern negated.

WTI: 200 DMA bounce- stop under last Thursday lows.

UPDATE 4/3: Holding long, needs to move soon though.

UPDATE 4/16: Stopped out of this trade last week when it broke below support.

ROYL: Trendline and Moving Average support

disclosure: i am long ROYL at $5.09

UPDATE 4/3: Closed ROYL @ Breakeven- Time stop

Here's are a few long setups I'm watching today March 29th

CLR Pullback to moving average support.

UPDATE: Trimmed some profits today on CLR but still long May $85 calls

UPDATE 4//3: Closed May $85 calls

WLL Pullback to trendline support

UPDATE: WLL still displaying relative weakness.  Still long but watching closely

OAS support bounce

UPDATE:  Took profits on this one today as it entered MA resistance.

With oil at $105 it is surprising how weak oil stock are right now...  Directionless trading for over two weeks now...

Good Monday morning to you!

Here's what I'm watching today...

WLL for continued upside off Friday's strong 50 dma bounce...

NFX for follow through on Friday's strong close off a 52 week low...

SSN for a bounce off the 200 dma...

Disclosure:  I am actively trading all these names.

Mid day update:  WLL, NFX, and SSN.... yawn.

Not much going on today across oil and gas.  Dow up 120, and S&P 500 up 12...

Update:
CRK inverse head and shoulders with neckline at $17.00, looking for an upside breakout...

Disclosure: Long CRK stock

Big insider buying on WPRT at $44.30 last week- near 52 week highs.  That's a vote of confidence for the nat gas switch if I ever saw one...

CLNE is also at 52 week highs.  Already sold out for nice profits on this one, but now wishing I hadn't.  Waiting patiently for another entry...

Iranian exports dropping 300k bpd is definitely bullish for oil.  I am trading US based onshore E&P companies on the news....  NOG, TPLM, SSN, CRK

Also getting interested in HEK at these prices... good play on water treatment in various oil and gas fields...

Mid day update:  oil holding strong along with E&Ps.  Like NFX right here.  Left for dead Bakken producer with big upside.  I am long June35 Calls...

Update on NFX: good upside volume at 52 week lows...