November 3rd – PULLBACKS

It’s Friday, there is only one trading day left in the week, so I want to cover a couple of questions that I get from time to time in todays report.   I will do a short review of a few things first,  and then I will just cover everything else in greater detail in the weekend report.  For now, this report contains a brief review, a couple of trade ideas at the end,  and a lesson or two in the middle.

 

 

SPX – No change here from our expectations. This looks like day 6 of a new daily cycle.

 

GLD (FOR GOLD) –  Gold again held up better than the Miners, as discussed in the report yesterday.  For now I view this as all one daily cycle, so it would be on day 19.  The Miners already failed theirs and broke below the Early Oct dcl,  Gold is holding up above those lows.

 

GDX–  Miners broke down below the Oct 2 dcl (failed), and it is uncertain whether a new dcl is in place at day 18,  or are we on day 23.  GDX could NOT get back above the 10sma. I will discuss this further in the weekend report and have discussed it in detail in past reports.

Some MINERS do look good to me, because they are NOT giving in to the selling.  Look at  SA, SAND, GSS, NSRPF.  These miners do remain close to their recent highs, and this is noteworthy.

 

ENERGY QUESTIONS  – I had to leave my house from Noon to 9 on Thursday, and when I got back, I had some common or normal questions about Our  Energy sector & Energy trades.

 

 This section will answer several questions that our readers have.  Yes, I am still Bullish, and I have pointed out that pull backs along the way will be normal.  Lets look at charts to answer a few more questions.

 

IOH – Are we overbought?  No, the OIH & the XLE are not what I consider overbought.  Compare the similarities of the first run up with the current one. In the stochastics ( lower box) the current reading happened at a time when the rally just started getting good ( Blue arrows).   Note: There was a 2-3 day pause at the 50sma in September, there was a pause today, and it is normal.

XLE –  Highlighting that down day Thursday, we saw a few of these in the run higher August – September. This is normal market action.  Often I use this as an opportunity when I have taken a position at the lows to “Add on the dips”.

XLE SAME CHART – Dips often drop to the 8 Ema  ( or 10 sma).   If I think that this is day 4 of a new daily cycle, after a 1 month long consolidation,  then I cannot consider this ‘overbought’.  I got that question a few times today. ‘Some Energy stocks’ may be getting overbought, but this 1 month consolidation is not overbought after 4 days in my opinion.

 

XLE – Again, by examining the first move out of the base, we may find clues about Thursdays dip and how it will play out.  Yes, we had one back then too.  🙂

Another question :  COULD THIS ENERGY SECTOR 2nd LEG HIGHER FAIL?  Yes, anything can happen in the markets, but we work with ‘probabilities’ & use stops for such cases.  The lows seem to be in, the first August run higher was very strong, and the next leg up is now starting.   Energy stocks across the board are running-  so ‘the probability’ is that this will continue.

 

EXAMINING 2 ENERGY STOCKS WITH THAT IDEA IN MIND

 

WLL #1–  2 Ideas – and this is The first idea.  IF the 2nd leg roughly matches the first leg in an a-b-c type move to the 200sma, it goes like this and I might expect a tag of the 200sma. Look at the volume on the 2nd leg. That is encouraging to me.

WLL #2 Idea Two – Wll was down today, so was I worried? No. Please Read the chart.

 

SO I want to check the big picture for clues too.

 

WLL WEEKLY –  If you can endure the possible choppiness, this looks like it has another 20% in it minimum. On the Weekly Chart of  WLL – Here I see a break out from the downtrend with the initial run, and then a back test.  Now a 2nd move higher towards $8.

Let’s Look at another trade

 

OAS #1 – Is this dip something to worry about? Many energy stocks began to dip today, so apply this thinking to other energy stocks too.

1. There is a gap to fill.

2. I would actually be thinking of possibly buying this dip if it tagged the 10sma, bull flags here, holds up above that 10sma, etc. As long as it is a controlled pull back. See the ‘Note’ however.

3. It COULD drop to the 50sma, but that back test already happened, so I do not expect that.

NOTE:  Earnings are Next Tuesday  Nov 7 – so I’d keep THAT is in the back of my mind.

OAS #2 – With Earnings Tuesday,  if they don’t go as expected, weakness may also come in the form of a deeper sell off, and then higher.   a-b-c style.  See the chart,  E.W. style.

 

OAS Bigger Picture – If we see  Good earnings, we could see  E.W. plays out like this. These often eventually do form a giant Cup over time.  So OAS started pulling back,  but it isnt bad at this point…

XLE –  Read the chart about OAS.    So if the next leg higher for XLE & OIH matched the first leg, it is just starting as shown here.  Please read the chart.

 

Some are still close to their lows

 

DNR WEEKLY –  Still waiting for earnings, this one may be ready to go if the earnings are good.  They release & have a conference call on Tuesday Nov 7th, and it looks like a possible inverse H&S.  Put it on a watch list? Buy a break out? Wait for earnings?  Buy here with a stop below $1.00  , etc

 

 

 

So this sector ,  like the Miners,  gets tricky once we get well into the move.  After a strong 4 or 5 day run higher,  there can be pullbacks, so it gets difficult to just jump in and buy now.  It is not often possible to predict whether a certain  Energy  ( or Miners )  stock is going to just take off and keep running higher,  pause and put in a bull flag as shown  in the report,  drift to the 8 EMa  or 10 sma, etc.   By using the weekly chart, I may get an idea of where the stock wants to run to, where resistance is, etc, but the risk is to the downside once they get 3, 4, or 5 days higher out of the lows.  At this point,  I buy the dips or I might just try to find one coming out of lows after earnings.  They often pull back to the 10sma,  just make sure that they are not slamming down on heavy volume.  I do not buy into a price slam down until it shows me a reversal or sign of strength.

 

Enjoy your Friday trading & your upcoming weekend!

 

 

~ALEX

 

Note to Eifion from the comments section:  To make a long story short, You posted a question early in the trading day and it didn’t auto load for me, because my computer went to sleep mode.  I missed it. later you re-posted a shortened version of that same question , but I didn’t understand what you were asking, since it was shortened & I missed it the first time . Later that day I refreshed my page & saw the earlier posts where you asked those questions in more detail.  I just wanted to say that I’m Sorry about that confusion and being unable to answer your question during the trading day.

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IPI –  This stock has been very tough to hold at various times in the bull run higher, unless you bought it much lower and have been holding on.   Right now, however, this does look like it may want to continue higher from here.  I’d call this a buy since it closed over the 50sma.

 

GRPN – I pointed out this trade that I took on Wednesday, since they released their earnings call intra- day.

GRPN WEEKLY –  I also showed the resistance at the 200 ma  ( weekly).

GRPN –  I watched GRPN all morning and it was only up 2 or 3 cents, but the follow through came in by the end of the day.  What about that weekly resistance?

 

GRPN WKLY UPDATED–

GRPN did close slightly above the 200ma on the weekly  (  there is 1 day left in the week).

MX –  A semiconductor earnings release that went well. This looks ready to go and remains oversold. This stock has been in an uptrend, but it is NOT easy to ride yet. Sometimes a stock like this will finally Pop & take off straight up out of a consolidation, but notice the ‘ride the waves’ that this stock has handed out.  You may choose to trade this quickly or buy & hold, or just skip it.  It has basically doubled in 1 year, but it has not been a fun ride in my opinion.

VALE –  In the short time that I looked,  couldn’t find their last earnings report, never mind the next one. You may want to find out if they release soon before buying, but this set up does look good.

Note:  AKS & CLF did not do well with earnings.  X  jumped higher by $3 when they released theirs.