Thursday, June 19, 2008

Oil Breaks Down, But Most Charts Hold Short-Term Support; Are They Topping?

Just got back a little while ago and have pretty much caught up with my scans and what I missed today in the second half of the market. I don't have time to get charts up tonight, but here are some random thoughts based on my scans.

  • My account "new highs" lasted about three hours as the gains I had in OMNI and NGAS disappeared in the afternoon and I was stopped out of both positions. OMNI gave me a small loss while NGAS gave me a very small gain. I was also stopped out of CBI for a small gain. I haven't figured out the percentages right now. The only positions I have right now is short FCSX (which stupidly finished above its 50 day, so we'll see how long this lasts) and short CMO. I also still have CFW in the IRAs as this bounced right off its 9 day moving average.
  • Obviously the main story today was the lower oil prices and some of the selling that took place in this sector. I am guessing we are going to hear a lot of talk about how the sector has topped - maybe it has. I will say this - looking at my scans, I saw very few oils that actually broke down through their short-term moving averages. The USO held its 20 day moving average today and is still above the lows of this recent range. Yes, today was bad if you are invested in this sector - I know personally, believe me - and some of the selling was heavy. However, the moves in these stocks have been so big that days like today are to be expected once in a while. The coal stocks look more toppy after today than the oils do. If the heavy selling continues in the same manner tomorrow, then I would consider the possibility of a top here much more seriously. If USO falls below $105.80 tomorrow, then I think a top is more likely, especially if it would gap down, setting up an island reversal. Right now, I will give this sector the benefit of the doubt. I also have no clue if options had anything to do with the action - same deal tomorrow. If you want to get short in the oils, you could try DTO.
  • For oil being down so much, I wasn't that impressed by the action today. It doesn't look like the market could close at highs. Buying interest in terms of the number of 4% breakouts was not extremely heavy at 192. My BOP scans (showing underlying accumulation in stocks) continue to be low this entire week. After being down two straight days before this, and with an obvious catalyst today in oil prices for the bulls to feed on, I just don't think they did that great of a job. Just my opinion.
  • One bright spot for the bulls is that once again, the financials would not close below their March lows. It looked like they were going to earlier in the session, but buyers came in once again. I still get the feeling this is inevitable, but as of now, the bulls are standing up right there.
  • The VIX seems to be forming a little triangle pattern here and a breakout or breakdown could fortell where we go from here in this market - something to watch.
  • The indices are basically still mixed - the Nasdaq and small caps continue to look better, with the S&P and Dow lagging. Levels to watch on the Nasdaq are 2484 on the upside and 2432 on the downside, and on the S&P 500, 1365 on the upside and 1330 on the downside.
  • With options expiration, I am going to do my best to limit my moves tomorrow. I am watching some stocks however on both sides of the market. On the long side, I like SQNM and ACOR on further pullbacks, and AEHR popped up a bit today and I like it. I am also watching GU, TWLL, AUXL, ESLR, VSCI, STEC, and DGLY.
  • On the short side, if oil slips, my favorite shorts are EOG, APA, and ATLS. Other shorts are SID, HSC, YTEC, JST, and UFPT. Shorting is tough right now with all the volatility out there.
Hope this helps. I'll be back to normal tomorrow. Best of luck Friday.


Anonymous said...

Hope you kept an eye on SOHU!

Mac said...

I did, and I see what it is doing today without me. I know I posted it sometime this week as forming a possible head and shoulders pattern, but I though it would likely bounce off its 50 day moving average and maybe chill there for a week or so before heading lower. Obviously I was wrong. If you look at the last week, however, you can see the volume kept decreasing as the stock bounced, which is not good. Oh well, can't get them all.