Semiconductors - Oil Stocks and EnCana Corp - ECA

Semiconductors moved higher with Novellus Systems - NVLS, KLA-Tencor - KLAC, and Hittite Microwave Corporation - HITT making day highs most of the day. The Semiconductor HOLDRs - SMH, stalled at trendline resistance however. The bulls and bears have a battle going on in semiconductors that is going to break one way soon.

On the other end of weakness, oil stocks started falling a few hours before lunch. I keep an eye on the Holdrs, because it gives me a good read on major stock sectors. Oil stocks are always on my radar. With the weakness starting, I looked at a few of my favorite traders which include, EnCana Corp - ECA, Cabot Oil and Gas Corp. - COG, Marathon Oil Corp. - MRO, Southwestern Energy Co. - SWN, and Valero Energy Corp. - VLO.

All of them, except MRO, are in a downtrend. The 20 day moving average is also acting as resistance on most. A lower low followed by a lower high is a reason to sell short. ECA looked like the best bet, with a lower high and break of support on the 15-minute chart.

ECA triggered a BS3 making R = to around .55, as the stop was set at the high of the day. Luckily, the stock gave an uptick after breaking support. Often times, selling short can be tough to execute, and you have to chase them to get filled. The plan was to hold the stock short until the end of the day. This provided a 1.08 R. With two deep red bars, the trailing bar method was used as a stop.

I’ll be watching these stocks as shorts tomorrow again on lower lows.