Monday Morning

Gator's Chart of the Day: PSX

Energy is getting my attention of late.  The XLE has been moving steadily up from its 50 day simple moving average and has printed 6 consecutive green candles.  (You can take my word for it or check out your chart.  I'm not putting one up here.)  One energy stock I'm watching is Phillips 66.  It was a spin off situation and has been trading on its own since the end of April.

Last week I mentioned briefly in the blog that it had qualified for Dan Fitzpatrick's IPO strategy.  We did not discuss it at the time so I'll take a moment to do that now.  Basically, Dan likes to buy a new issue after it has pulled back from the initial high, found support and moved back up to a new high.  Why?  Because interest in the stock has been expressed and there is no resistance to hold it back.  (Makes sense to me.)

PSX fit this general criteria last Monday when it cleared 34.90.  On Wednesday it pushed up to 37.67 before falling back slightly.  It sold off on Thursday and more on Friday where it printed a low of (is this a coincidence?) 34.91.  From that point it moved back higher and closed at 35.52.  This sets up a good low risk entry and trade to the upside.

The Trade
Thie strategy is similar to that described last Thursday for TIF.

Scenario1
If the stock opens lower then wait for support and buy the bounce with a stop a bit below the intra-day low and probably just below the 20 day simple moving average.  Add to the position only if it is already profitable and keep moving your stops up so that in case the market drops you would not be hurt by your position size.

Scenario2
If PSX opens higher wait for the initial enthusiasm to pass and look for a small pullback and bounce to enter. The stop will be a bit looser so the initial position size should be smaller than Scenario1. I would recommend using the previous day's low strategy for stops and add only when each tranche is profitable.