Traders,
Week over week, it will be much of the same focus. Why? We’re still in a choppy tape, with the broader market stuck within a lengthy range. Given the major headline risk and uncertainty, it remains a trader’s market rather than an aggressive swing market. With that being said, of course, anything can change on a moment’s notice with regard to the geopolitical uncertainty.
And for the most part, that will be my focus early in the week. Specifically, looking for breaking news trades in Oil (USO), Small-Cap Oil trades, and a potential Mean Reversion Opp.
Let’s go over it.
Breaking News / Mean Reversion in USO: RSI closed near 89 on Friday in USO, which is just remarkable. Along with the RSI, we’ve got volume expansion and consecutive gap days, and a major extension from the 5-day SMA. Typically, that would line things up for an A+ mean-reversion short on Monday for me, either with a gap-and-fade or an FRD setup. But, this is obviously macro-related, and so, like the Silver trade, it’s not as straightforward. But I’ll just stick to intraday trades in USO for this watchlist.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
Firstly, on Monday/Tuesday, I’d be looking at 2 potential scenarios. If we gap up again, I’d look for failed follow-through. So, I’d look for an extended gap to be met with steady selling pressure. Thereafter, IF I notice a tape shift and clear lower high and level to risk against, I’ll initiate a short.
Or, if we gap lower, I wouldn’t chase weakness. Rather, I would look for any attempt to reclaim or re-test key levels from Friday to be met with supply. If I notice a stuff or resistance hold firm, I’d short the lower high and look to maintain a position until the trend breaks or we get a capitulatory downmove.
Lastly, I would be prepared for a headline. If USO is holding firm on Monday or even Tuesday, I want to be prepared to react to a headline positive for USO. What might that headline be, and what are the types of headlines that could come out positive for oil supply? That’s where the preparation comes in. Tip: If you’re struggling with preparing a series of different headline potentials and what they could mean for the price of oil, use AI!
Failed Follow Through in Small-Cap Oil Stocks: Very pleased with my approach last week to small-cap oil stocks. As previously mentioned, they were and continue to be a main focus during this oil theme. Whilst the theme was still fresh last week, I remained open-minded and caught moves on both the short and long side throughout the week.
However, now that USO is in deep overbought territory and several of the leading small-cap theme names have rejected at key levels on Friday, I’m leaning short-biased.
For example, if BATL, the leader of the small-cap theme, were to gap up on a USO gap or re-test $26-$28 and fail, I’d be short. We’ve now seen that area hold firm as resistance across multiple days. Alternatively, if USO gaps lower, I’d look to short pops in BATL as long as the multi-day VWAP (from Friday) holds steady as resistance.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
Similarly, in TPET, $2.2 – $2.4 is beginning to shape up as major resistance. Unless Oil truly is a black swan, I’m inclined to short pops in TPET that fail, with a HOD stop. Alternatively, if we see weakness in Oil, I’ll be focused on shorting TPET intraday on failed pops toward $2 – $2.10, or on holding below Friday’s low.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
Palantir / Software Short: A nuanced idea given the rotation and headline risk right now that exists in the market. But all things being equal, I like IGV and many of its top holdings, like PLTR, on the short side this week. Why? IGV has made a significant move off its oversold low. It’s up nearly 9-days in a row. PLTR has followed suit, recovering toward its 50 and 200-day moving averages. On Friday, the 200-day held up as resistance. I’d take action on this idea if I notice some weakness in software names, and any attempts to reclaim upper-range levels from Friday fail. I’d be open to a swing short with a HOD stop.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
Whilst Oil will be the primary focus for the beginning of the week, I’d also like to add in NVIDIA. I’ll be paying close attention to NVIDIA’s 200-day SMA and last week’s low. Not only might there be a trade there, but if NVIDIA takes out last week’s low AND its 200-day SMA, I’d find it hard to believe the market stays within its range.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.