Buy Alert: May 29, 2015

| May 29, 2015

Buy Alert: May 29, 2015

 

Option Strategies:

Buy US Oil Fund $USO July 17, 2015 $20.00 calls for $1.05 or better.

Buy Newfield Exploration $NFX July 17, 2015 $37.00 calls for $2.30 or better.

 

Commodity Outlook: Crude Oil

It’s been a rather boring few weeks for the price of West Texas Intermediate (WTI).  After running to $62.50 a barrel in early May, the commodity has traded in a lackluster sideways range at the high $50 area.

But now the bulls look ready to make another charge…

After trading down to $56.50 early in yesterday’s session, the commodity reversed strongly higher to close above $57.50.  Investors are pushing WTI even higher in today’s session.

With the peak of the high-demand summer driving season just around the corner, there’s a very good chance bulls push crude beyond the early May high in coming weeks.

In a best-case scenario we may see WTI push to the mid-$65 range.

Here’s how we’ll play it…

 

Resource Trade #1: US Oil Fund $USO

As you know, $USO trades in lockstep with the price of WTI.  When the price of oil rises, so does $USO.  That’s why we’re buying a low risk call position in $USO.

Here’s what we’ll do…

Buy the $USO July 17, 2015 $20.00 calls for $1.05 or better.

The current bid/ask spread for this contract is $0.96/$0.98.

Do not pay more than $1.05!

Our official entry price for performance tracking is $0.98.  Your price may be higher or lower.

Exit Strategy:

uso52915

 

Remember, we want $USO to trade higher.  Our first profit target is $21.50 while our second target is at $23.00.

Our risk control line for this trade is at $19.00.  If $USO trades below that level, conservative investors should consider closing this trade to preserve capital.

 

Resource Trade #2: Newfield Exploration $NFX

$NFX is a profitable mid-cap oil and natural gas producer with operations across the Western US.  Shares of the company have been responding well to the oil price recovery in recent months.  In fact, $NFX is already up 66% from the lows set in January 2015.

If oil runs back above $60 a barrel, $NFX will likely make another run at higher prices.

So here’s what we’ll do…

Buy the $NFX July 17, 2015 $37.00 calls for $2.30 or better.

The current bid/ask spread for this contract is $2.00/$2.15.

Do not pay more than $2.30!

Our official entry price for performance tracking is $2.15.  Your price may be higher or lower.

Exit Strategy:

Newfield Exploration

Remember, we want $NFX to trade higher.  Our first profit target is $40.00 while our second target is at $42.00.

Our risk control line for this trade is at $35.90.  If $NFX trades below that level, conservative investors should consider closing this trade to preserve capital.

 

Category: Commodity Trading

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