MAY 12 – Timing

After a brief market review, I want to point out something that seems to be telling me that now is the time to act. Lets begin…

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SPX – Price was rejected at the upper trend line, and it dropped down to the 10sma. The Red Circle shows that shortly after prior DCLs, price did the same thing.  A drop below the dcl would not be healthy, the first daily cycle would be extending way too far and I would be suspicious.

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From here I’m going straight to OIL, NATTY, and The CRB…

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NATGAS – This still looks bullish , but as mentioned yesterday, difficult to trade, especially using UGAZ.

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WTIC – Oil broke out of its sideways move.  ‘Timing’ –   I think the time to buy ( or keep holding) your energy stocks is now, because of the timing involved.  I can picture Oil breaking through that $50 zone and doing 1 of 2 things.  Either it then pauses and back tests and struggles at that area,  or people recognize it as a break through back into the $50’s and buyers step in. I want to be in Energy if we get that move higher.

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XLE – The XLE looks like it has room to run higher.  I will discuss some energy stocks at the end of the report.

CRB –  Look what the CRB did.  This chart actually is telling me that the CRB has put in a DCL with that recent drop. Granted the CRB didnt drop nearly as fast or deep as many of the commodity stocks, but this is a good sign that those Commodity stocks could be ready to move higher again. 

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I still expect GOLD & MINERS to drop into a DCL soon, so I am not including them in the report. Yesterdays report covers that .  In the comments section today,  I was mentioning that I thought Energy Stocks were looking good, set up properly, etc.  The same goes for some commodity stocks,  but they dont all look the same at this point.

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The title of this report is ‘TIMING’

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Remember the Bouncing ball illustration? Each daily cycle bounces higher , but the first 2 daily cycles are usually the strong ones, the 3rd one may include the peak, and the 4th will be a lower high , lower low?    A fourth daily cycle can really lose steam  ( Tell that to GOLD and Miners,  right?).  Well,  OIL, Energy, and Commodity  stocks may rally again, but we want to get in early, because they may show signs of topping sooner.   This time I want to be watching for that.  A 3rd daily cycle is the time that I often try to choose stocks that have already proven themselves,  not the laggers at lows.   Als if earnings have been released and the reaction was favorable, this is helpful.   Lets look at some stocks.

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FCX –  This is not an ugly chart, this is an established uptrend. Higher Lows and Higher Highs.   It held at the 50sma, this could be bought ready to rally and could be bought with a stop below the 50sma.

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 HBM – I still own this one and added today because of the Island Bottom that I mentioned at 10 a.m.  An Island bottom is a buy and you can just get out if that gap fills.  The gap did not fill, it continued higher.

HBM DAILY – If that was a low, it should be able to break above the 20sma . That could be another area to add.  HBM actually closed back above the 200sma  (not shown) . 

So for Commodity stocks ,  another move higher may be about to take place.  The CRB broke above the 200sma, and my indicators are saying that was the low.  All I can do is enter positions with stops in place and look for follow through. 

ENERGY STOCKS –  Oil is moving higher again, and it could run from here  (At least to $50, possibly more).  I have owned and held on to a portion of my BTE, BCEI, and LGCY stocks because I caught them low and these have acted well through out.  Some Energy stocks have failed at earnings,  others have done very well, so use that as a guide too.  Lets look at a few ideas, to show you what you may want to look for if you are shopping for ENERGY STOCKS.

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BCEI – I’ve mentioned this one several times due to the strong volume coming out of that base. This chart was captured Wednesday morning for the comments section.  The pullback moved sideways along support and today a burst of volume started coming in…

BCEI –  I saw this shake out in real time Wednesday morning on the 15 minute chart and posted it in the comments too.  I added to my position in the $3.20’s, my stop on that would be todays lows.   Take a look at the chart above again.  That reversal is also a buy in my opinion, because of the timing for OIL right now. The stop is still below Wednesdays price.

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BTE –  I have held onto my position in BTE , showing this weekly chart with nice upside potential if it can break out and run.  I see minimal resistance on the left hand side of this chart.  It pulled back and…

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BTE – Today BTE reversed higher off of the 34 sma and volume looked good.  It is oversold, but it basically has just dropped and moved sideways. I would  ( And did add) buy BTE here with my stop for this purchase slightly below the 50sma.

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2 other stocks mentioned here quite a few times were WPX & OAS . I think that they both have acted well and their pull backs were somewhat mild .

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OAS – OAS held  the 34 sma for a few days and reversed higher Tuesday and Wednesday.  Oversold, this could be ready to run and this would be a low risk entry.

WPX – My first BUY recommendation was breaking above the trend line at $4.30 shown below.  Did it act correctly or bullishly after that?

Yes , it ran up into a wedge consolidation and then it even continued higher.  To me, that keeps showing follow through, so I would expect that if Energy is going to run higher,  the WPX reversal Wednesday will hold and have follow through.  This can run from $8 to $14

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ECA – This stock ran from $3 to $8 and did a 38.2% retrace to the 50sma. Todays reversal was very strong and had strong volume.  It is oversold and may just continue higher, but if it dropped Thursday, you may get a lower entry.  It is hard to buy a stock that was already up 14% in 1 day.

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CWEI –  I watched this run day after day as it crawled higher in April.  I never got an entry in this one.  It doesnt look like much, but when you look at the actual run, it was from $6+ to $21+!  This sideways consolidation looks bullish to me, especially above the 50sma. Inverse H&S?

LGCY –   Somewhat riskier, but I thought that I would point this out.   This could be a bull flag.  Some will buy  a break out and place a stop at the apex of the flag.  This does have the risk of still being extended, and  possibly dropping to the 50sma instead of breaking out.

I also like DQ, SXE, and several others.

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So that is where we stand today.  The markets actually rolled over a bit Wednesday , yet Commodities and Energy stocks put in a reversal and stayed green. I think that the timing for OIL and the CRB to run higher is now. Even re-entering for a week or two may be enough to make some nice gains. I still expect Gold and Miners to roll over.

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All we can do is see what Thursday and Friday have in store for us.   Timing is important though.  You dont want to wait a week or two and then jump in after you see a move higher has happened.  That approach could have some buying too close to a peak on the run, if this is a 3rd daily cycle.  Best wishes and as always , thanks for being here at Chartfreak!

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~ALEX