How do you trade snapbacks? Let’s look at Marathon Oil (MRO). (December 18, 2014)
I want to look at Marathon Oil ( NYSE:MRO ) here. Here’s why, this is like the “Quick and the Dead” otherwise known as the “Quick and the Losers”. This entire sector was bouncing; you know we looked at this, I’m pretty sure I looked at it in the “Free Chart” videos, I know I did in the premium videos.
This is the deal, if you’re buying these stocks the first thing you want to consider is their counter trend moves, because the trend is down and what you’re doing is you are buying the extremes. You can even buy on the second day, you see the stock gapping up, and you can go ahead and buy. You could even wait until the stock moves above this high of $26.00. Ultimately, a couple of days later, you can sell this stock on the open because it gapped up for an almost 10 percent move.
You know that the stock is trending lower, we can look at any of these; Concho ( NYSE:CXO ) it’s trending lower, it gapped up, it started trading higher a few days ago. Chevron ( NYSE:CVX ), same thing, started trading a couple of days ago, it’s a Dow component so it’s going to be moving higher today. But guess what you’re going to want to do in the next few days?
At least consider shorting Chevron ( NYSE:CVX ), or at least don’t buy it. Do you really think that because, “Oh my gosh, Chevron’s ( NYSE:CVX ) up today another 2.84 percent while Marathon Oil ( NYSE:MRO ) is up 3.34 percent, but it’s closed lower than the open. So I think all this stuff moves higher.” Maybe so, but what I’m saying is, when you’ve got a down trending stock that comes back up to resistance you watch for it to falter.
That’s the point, you watch for it to falter, you want to see the stock, if it comes up here lets say to the 50-day moving average where it’s not been able to push above it; if this thing comes up here, call it 113.00 or 114.00 don’t short the stock just because it’s doing that, don’t do that. Instead wait for the stock to start rolling over a bit and then you short it.
That’s a better way to trade these oil stocks, you buy them on the extreme moves, and then as they start to snap back you know you’re going to get some short covering. But then as oil moves lower you want to go ahead and sell these in to rallies and that is going to work every single time, until the one time that it doesn’t. The one time that it doesn’t is your signal to forget about this, buy the big weakness, and then short in to the rallies, and instead just start buying any dips and hanging on.
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