Buy Alert: June 26, 2015

| June 26, 2015

Buy Alert: June 26, 2015


Option Strategy:

Buy Whiting Petroleum $WLL September 18, 2015 $36.00 calls for $2.70 or better.


Commodity Outlook: Crude Oil

No doubt about it, WTI crude has turned into a real snoozer…

As I mentioned in Wednesday’s update, the commodity has been stuck at the $60 a barrel area for what seems like an eternity.

As a result, energy names have been sliding lower the past few weeks as traders look to hotter industries for short-term gains.  One look at the Energy Select Sector SPDR $XLE and you’ll see what I mean…

As you can see, it’s been a tough slog for $XLE the past few weeks. But as you’ll also see, $XLE is toying with technical support (green line).

There are two situations that can arise here…

$XLE can hold support and rally.  Or the energy ETF can break support and fall to the $73 area or lower.

Since we already have a put position in the SPDR Oil & Gas Exploration and Production ETF $XOP from last week (which acts very similar to $XLE), let’s take a low risk shot on a bounce in energy.

Here’s how we’ll do it…


Resource Trade: Whiting Petroleum $WLL

Despite the broad weakness in oil exploration stocks the past few weeks, $WLL has been holding up quite well.  In fact, the stock is forming a promising technical pattern that could very well lead to big gains in coming months.

I’ll show you what I’m talking about in a minute.  But first, here’s the option contract we’re interested in.

Buy the $WLL September 18, 2015 $36.00 calls for $2.70 or better.

The current bid/ask spread for this contract is $2.25/$2.55.

Do not pay more than $2.70!

Our official entry price for performance tracking is $2.55.  Your price may be higher or lower.

Exit Strategy:

Whiting Petroleum

As you can see, $WLL is forming a triangle pattern (purple lines).  This chart pattern typically results in an explosive price move.  And since $WLL has held its ground rather nicely the past few month, the next big price move will likely be higher.

Remember, we want $WLL to trade higher.  Our first profit target is $40.00 while our second target is at $47.50.

Our risk control line for this trade is at $33.50.  If $WLL trades below that level, conservative investors should consider closing this trade to preserve capital.


Category: Commodity Trading