Scoop Them Up?

Along with our market review, I want to discuss some of the selling we saw in Oil and Energy stocks Tuesday. What are we looking for in the pull back that we see?  Should we be scooping them up, or not? Lets review our markets…

SPX – With our recent Break out, follow through has stunted so far.  Of course this could still go higher and complete a 5th wave up, but it also could pull back  Lets take a closer look for clues.

The NASDAQ has just made a break out to new all time highs, but this pattern has appeared.  This looks ready for a drop.

Or is it this way?  It also calls for a pull back soon.

Now we could just get an a-b-c  type drop and then a continuation higher.  These drops could test the recent break out, but there is also something known as a bull trap and a bear trap.  This is when a break out higher or lower is a false move to suck in more traders, and then it reverses and drops quickly.  There is some talk of this out there in the trading world, because of the VIX, and other signs of weakness,  but right now it looks like a valid break out until it is not.It is good to remain alert though, so lets take a look.

.

The VIX –  This is absolutely at lows. I mentioned the vix several days ago at 13-14 and pointed out how we’ve seen tops in that area.  10-12 is where the VIX really used to call a top ( temporary or permanent).  This is our VIX currently, so we have to take note. This is about as low and oversold as it will get. 

VIX – Zooming in you can see that LOWS happen with the Vix much higher. Tops happened recently when the VIX is in the 13 area.

CONCLUSION: 

The VIX has continued lower below 13, and divergence is in the MACD.  A BEARISH RISING WEDGE is in the NASDAQ,  the SPX has not had follow through with its break out from the consolidation.  Add it all together, and be cautious if you are LONG right now the General Markets, and at least expect a pullback soon.

.

2 important notes with OIL

.

WTIC  #1 – Out of the FEB ICL, please note that Oil went higher for 3 days, and then dipped to the 10sma. It then popped and fell back to the 10sma. Oil could drop here to the 10sma  ( OR  see Chart #2…)

.

WTIC #2 – DO not panic, I need to show this observation too. Oil looked like it bottomed in January, and then UNDERCUT to the real ICL.  It was a shake out move at the lows. Notice the January lows DID break above the 10sma and DID have a MACD cross, like we see now.  Then a sell off to new lows gave us THE ICL. Remember that we are early in the cycle count for Oil, still in the 30’s if this was not the ICL.   This is NOT bad news entirely, but it is a caution for anyone leveraged OIL,UWTI, UCO, etc.

Please notice this: Many OIL STOCKS bottomed in January with that first low in Oil, and when OIL undercut to a new low in February,  These OIL stocks DID NOT make new lows. So even if oil breaks the lows, Oil stocks could become an awesome buy as they hold their lows. Lets look at examples.

.

BTE – Lows in JANUARY were THE LOWS. SO I look at BTE now and I will add to my position if we drop to the 10sma. Meandering down to the 200sma would hurt, but I’d add there too.  I find that unlikely.

OAS –  The lows in JANUARY were THE LOWS, even as OIL broke down to new lows in February.

My chart from Aug 5th, I said that if you see this, you may want to be ready to buy. Since then it ran even higher to $9.50, but began to turn down Tuesday.  Look at the chart above again….watching the 200sma as well as the 10sma .

CONCLUSION:

We could get a drop in Oil, and it MIGHT even undercut the recent lows. I will not panic, I will see how the oil stocks are acting and be ready to add to my positions if I like what I see. 🙂

.

NATGAS – I drew this for someone in the comments this morning. I see 2 possible scenarios here too, but this is the one that looks to be taking place. It could even drop right to the 200sma without a bounce as shown.

NATGAS #2 –  That volume and MACD Tuesday lead me to believe that this is not just going to be a shake out like we saw in the 1st rectangle, but you do see the similarities, right?  I still think that NATGAS wants to drop to the 200sma forming a new ICL.  The last one was in MARCH, that is 5 months ago.

RICE – A reader here pointed out this energy stock to me recently, it was not on my list. Thanks G.M.  What a great looking chart!   I looked up the profile and it is mainly Natgas. That long sideways drop in NATGAS in May and June didn’t bother it at all. A drop in NATGAS now may give us a back test. I also added the 13sma for this one. These are all buy points.

GOLD – Monday Gold was down while Miners were up, so we hoped that Gold would follow Miners and hold that line. Gold reversed and  did turn higher on day 11. Shaping up after that flash drop Friday, this looks good and we could start a nice run higher in Gold.

GDX – I hate it when volume shrinks, but at times it happens right before a break out higher.

GDX #2 – This looks encouraging. I have seen volume drop before a Pop. ON day 11 and run to new highs would be great to possibly clinch a R.T. (Right translated)  Daily cycle.

MORE CHARTS

.

BAA – Earnings are released Wednesday? This is a bullish set up at this point.

PLGTF – Currently consolidating below resistance, this looks really good too.

TCK – This is a stock that we traded in the past. I just want to point out the big scary consolidation after the run from under $3 to $12 was just a bullish consolidation.  SCARY TO RIDE? YES.  It became a cup & handle and TCK is now a stock that went from $2+ to $17 +.  It is NOT an easy ride if you worry about the wiggles, but look at the results of not getting too emotional on every dip. This had many multi-day sell offs.

LGCY – Resistance was at the 50 & 200sma, but I do not think that it will remain a problem. LGCY actually broke above it Tuesday for a while, getting back above $2.00 for a while.  Time will tell.

That is your Tuesday market update.  I’m looking at a possible buying opportunity if we get a pullback in Oil after the inventory report. Have a great Wednesday.

.

~ALEX