Weekly Update: August 26, 2015
Weekly Update: August 26, 2015
Big Picture Outlook:
Well folks, it has been quite a week…
Since we last spoke, the markets have been thrust into a historic bout of volatility.
As I’m sure you’re aware, the major equity indexes just suffered one of the worst 3-day meltdowns in history. At one point, the DOW had shaved off nearly 3,000 points from the recent May highs- an incredible downturn.
As it sits now, the DOW, S&P 500, and Nasdaq are all registering pullbacks of at least 10% from the recent highs, which puts all these markets in correction territory.
But here’s what’s most important…
All the major indices have broken through critical long-term technical support trend lines. As a result, we’re going to see plenty of volatility in coming weeks as investors react to every tidbit of information out of China.
Speaking of China…
Much of the reason we’re seeing such immense market moves is because China’s markets are essentially crashing. The Shanghai Composite Index has lost 42% since mid-June- a mind-boggling downturn.
The People’s Bank of China (PBOC) is taking rather drastic action the past few days in an attempt to stem the fear in China, but as of yet, nothing seems to be working.
How are commodities reacting to all this?
Gold rallied sharply late last week as investor sought out the perceived safety of the metal. But this week the yellow metal is once again turning lower as investors realize the metal really has nothing to offer in the current environment.
What about crude?
It’s crashing right into the high $30 a barrel range as investors factor in continued signs of global surplus along with equity market fear. With WTI now into the high $30 range, it’s quite likely it drops further to test the 2009 low around $34.
While there’s still plenty of bearish fundamentals backing crude’s drop, it’s unlikely the commodity drops straight through $34 without a fight from the bulls.
Some degree of short-term price bounce will occur when WTI tags the $34-$35 area- you can count on that!
Let’s see how this market madness is affecting our open positions…
Portfolio Highlights:
Editor’s Note: I won’t update every open position in every update. I focus on the positions with significant news or price movement.
. . . . Oasis Petroleum $OAS September 18, 2015 $11 calls
Not surprisingly, $OAS turned south quickly as crude crashed into the $30 range and overwhelming fear gripped the equity markets.
Hopefully you heeded my advice from last week NOT to let this once very profitable position turn into a loss.
The bullish technical pattern in $OAS has been broken thanks to recent developments.
As a result, this trade is officially closed.
. . . . Silver Wheaton $SLW October 16, 2015 $13 puts
It was very close, but $SLW avoided our risk control line at $14.30 late last week.
But the best part is, $SLW is completely falling apart this week!
The silver miner is down a hefty 17% from the recent swing high as I write. The quick downturn sent our $13 puts skyrocketing to a 127% gain in today’s session. What’s more, $SLW hit our first profit target at $12 this morning.
That means you should be closing at least part of your $SLW put position for a very nice profit!
If you’re aggressive, keep holding these puts for additional downside in $SLW. With the price of silver seeking out new yearly lows at $14 an ounce today, there’s still plenty of downside potential in $SLW.
Remember, our second profit target is at $10.00!
. . . . $Goldcorp $GG October 16, 2015 $14 puts
Unfortunately GG just barely tagged our risk control line at $15.70 on August 20th. As a result, you may have closed this put position if you’re a conservative trader. That’s ok- you stuck to the plan.
However, if you’re more aggressive, you’re likely still holding these $GG puts as the stock plummets this week.
Thanks to the past few days $GG downturn, our $14 puts have jumped from a slight loss to a gain of 90%. What’s more, our first profit target at $13 was achieved this morning.
That means you may have taken some solid profits off the table today!
If you’re aggressive, keep holding for further downside in $GG.
Until next time,
Justin Bennett
*** Editor’s Note*** Be on the lookout for another high profit potential trade by the end of this week!
Category: Commodity Trading
