Energy continues to dominate with new highs and relative strength as markets oscillate around their yearly lows on lower volume. The lows have held for the past 3 days and a bounce attempt seems imminent as we saw breadth expansion today, but real strength has yet to come in.

Our energy stocks from Monday night have performed superbly over the past two days, especially today. Many crossed their buy points and closed much higher on the day, despite some intraday volatility on account of the Fed minutes being released at 2pm EST. In news-driven markets like this one, it’s crucial to be aware of the economic calendar.

Tonight, I’ll review updates on the energy setups from earlier this week, like SD which is up 12% from my buy point, along with a few others in energy setting up. Growth is still hiding in its shell, and I’m not a bottom-feeder so I’m avoiding it. We take what the market gives us and right now it’s energy. Let’s get into it!

Index Update

The Nasdaq remains below a falling 21EMA with net highs/lows negative for 35 days straight, signaling strong caution on long positions. Still no change here but the McCellan recovered today and we saw breadth expansion, the first sign of a potential uptrend.

The Nasdaq continues to hold the lows and oscillate in the recent range. It’s not time to get too excited as the price is still below all declining key moving averages. I’m now watching for a follow-through-day in the next few days and a hold of the low was set on Friday.

The S&P-500 looks a bit stronger than the tech-heavy Nasdaq as it houses more energy and oil stocks. I’m watching for a test and breakthrough of the 4,000 area, followed closely by a breakout through the 21EMA in blue around 4,060.

Stock Updates

SandRidge Energy (SD) broke out handily from the volatility contraction pattern (VCP) that I noted on Monday. The buy point was $21 and volume came in to follow through today. It’s now up nearly 12%. I would take some profit here and move stops up to even.

Valero Energy (VLO) crossed up through the $125 buy point and closed higher on a volume pocket pivot day. Stops up to $125 - looking for this one to break through $129 and into all time highs at $132.

CVR Energy (CVI) had tightened up nicely before it broke out through $32.50 today on above-average volume. It’s up 3%. Keep stops just below $32 and look for it to continue into all-time highs this week.

Eqt Corporation (EQT) is a leader in oil & gas that broke out today into 52-week highs through $45.50, but the volume wasn’t high enough for me to buy in. I’m still watching this one for volume to come in above the buy point.

Vaalco Energy (EGY) is another that triggered my buy point through the 50-day MA around $6.60, but volume was well below-average, so I passed on it. Watching this one as it continues to build a base up the right side, but it’s a laggard in the space as others are already breaking out.

Best Setups

The setups below are ideas, not outright buys; placing a trade is discretionary and depends on both the price action and volume. To succeed, you’ll need to make the trade your own based on your rules for entering and taking profits, and always use a stop-loss!

Chevron Corp (CVX) is an energy monolith that looks to be on the cusp of breaking out after building an 8-week flat base. The buy point is a move through $176, but high volume needs to come in through the breakout point as noted on the chart.

Golar Lng (GLNG) is a natural gas provider that’s been trading in a tight range after a stellar move earlier this year. It has printed several inside days in a row and today printed a volume pocket pivot as noted by the lime-green volume bar. The buy point is breakout above $25 with stops just under $24.

That’s all for tonight! See you back here on Sunday night for an update on our stocks.

Cheers,

Danny Deals