I’m trading energy stocks the next few days and here’s my favorite

  • September 1, 2005
  • Michael Kestler

Coming into Wednesday’s
trading session I was leaning to the downside
because of all the negative news coverage from Hurricane Katrina. I also felt
that the market would be slow going into the holiday weekend. For these two
reasons I was looking for my alerts to come up with selling short opportunities.
Once again, I was proven wrong about the market. This only reinforced my main
rule of trying to never lock myself into an opinion on the market. The real rule
is to react and trade the opportunity that the market gives you!

Well, the market handed us a great trading day. My scanner came up with a number
of great trading opportunities like Tiffany
(
TIF |
Quote |
Chart |
News |
PowerRating),
(
CHK |
Quote |
Chart |
News |
PowerRating), and
Allstate
(
ALL |
Quote |
Chart |
News |
PowerRating). But the real trader today and the stock I traded the
most was Valero
(
VLO |
Quote |
Chart |
News |
PowerRating). I ended up trading over a half million shares
today and four hundred thousand of these shares were strictly VLO.  Based
on the price action, Valero is obviously expected to reap the rewards of the
gasoline shortages caused by the  hurricane. It traded over 36 million
shares. This is six times the 3-month average volume of 6 million shares. It
also traded with a 9-point range.

Initially, I was busy trading TIF the first half hour. TIF opened at new 52-week
high of $36 and moved higher. I was purchasing shares every 10 cents higher and
was first stopped out 36.75. I re-entered at 36.86 when the stock went over the
old high and was stopped out at 37.07. At this point, VLO came up on my scanner
with new 52 week highs on a huge volume increase. Since I have had my best
trades with these conditions, I shifted my focus entirely to VLO. I was trading
the initial moves for 20 to 30 cents. When it got to about 102, the volume
increased even more, the offers began to disappear and the spreads started to
widen. At this point I started increasing my trading size and adding to my
positions and let them run. If you look at the chart below, you can see where I
was right with VLO and where I started overtrading, hoping for a resumption of
the run. In the next few days I will look to trade VLO  long with other oil
and energy stocks.

Have a great Labor Day Holiday

Mike Kestler

Please e-mail with any questions at
mike@evotrading.com

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