Friday, April 08, 2011

Do or Die Time: Refiners

The four refiners we like to follow,  VLO HOC TSO WNR all re-tested support today on very heavy action even though crack spreads were up 5%.  The bounced off their lows and all of them closed near support.   Bounce or die time coming up on Monday.   We tried our hand in VLO TSO but were early and weren't able to find any traction in either (sold both for small gains/losses).   It's often a good time to buy support when the whole sector hits it at the same time -- however, it also often needs to be held overnight, something we didn't feel like doing today.  Let's go through them all.

HOC through 60 support and overshoot into 20SMA.   It held and stock closed right at support.  Stop here would be the loss of the 20SMA. 

 TSO through 26 support and bounced off the lows but couldn't regain support.   Next support not until 24.5

VLO went through the 50SMA, overshot, and then bounced back to the 50SMA.   Again, if you're long you want Friday's overshoot low to hold. 

WNR had support at 17.5, again overshoot, and bounce off bottom back to support.  

The most common move from overshoot is a bounce back to initial support.  The perfect example here is HOC as first support was 60 which didn't hold, and stock overshoot move to 20SMA which held, and then stock bounces back to initial support.  As our readers know, when you get in an overshoot the first target is a move back to initial support.  This means if you got in HOC on the reversal at the 20SMA near 59.1, then your target is 60 which was primary support.

For more overshoot examples please see these links:

Overshoot definition and examples: 1, 2, 3, 4, 5, 6, 7