Weekly Update: February 18, 2015

| February 18, 2015

Weekly Update: February 18, 2015

 

Big Picture Outlook:

Unfortunately, the early 2015 bullish breakout in precious metals is looking more like a fake out. Gold is trading at $1,200 an ounce today, while silver is crossing the tape at just over $16.

What’s the deal?

As I mentioned previously, much of the early year strength in precious metals was due to the new quantitative easing program introduced by the European Central Bank (ECB).

Well-connected investors gobbled up gold and silver in front of the official announcement of the ECB’s inflationary policy. But ever since then, it has been a steady downhill slide for both metals.

Given the situation, is all hope lost for our long-term call trades in IAU and SLV?

Not yet…

Both metals have important technical support zones directly beneath current prices- gold at $1,180 and silver at $16. However, we need to see bulls protect these levels. If they don’t, there may be additional downside for the metals in coming weeks.

For now, remain patient and keep holding your January 2016 call positions in SLV and IAU.

Let’s get to rest of the updates…

 

Portfolio Highlights:

Editor’s Note: I won’t update every open position every update. I focus on the positions with significant news or price movement.

. . . . Agnico Eagle Mines (AEM) February 20, 2015 $22.50 puts

Here’s a trade from late last year that’s expiring this Friday. While we did get an immediate (and profitable) drop in AEM in the days following the trade alert, the gold miner eventually rallied past our $26.50 risk-control line.

Since these puts are out-of-the-money, you can just let them expire. This trade is officially closed.

. . . . Exxon Mobil (XOM) February 20, 2015 $92.50 calls

Here’s another trade set to expire this Friday. While conservative investors should have booked a small profit in these calls, aggressive investors will likely see these calls expire worthless.

However, that doesn’t mean you shouldn’t keep a close eye on these calls the next few days. While XOM is down today due to a refinery fire, it’s not out of the question to see it rally back above our $92.50 strike by Friday.

Remember, if you hold an in-the-money call option through expiration, most brokerages will automatically exercise it for you. That means you’ll own 100 shares of stock for each contract held through expiration!

. . . . Penn Virginia (PVA) March 20, 2015 $8 calls

PVA released their 2015 production guidance this morning. While oil output is expected to grow around 18% from last year’s levels, the company’s capex plans took a big hit.

PVA is cutting their 2015 capital budget to the $295-$345 million range- around a 60% drop from last year.

Of course, the company is responding to the drastic downturn in oil. It’s a necessary and prudent move considering the current pricing situation.

Unfortunately, investors are reacting quite negatively to the news. PVA is down 10% to $6.50 as I write.

While today’s news isn’t what we need for our March $8 calls, it’s a good thing for the company in the long run. This is a name to watch for a big rebound later this year!

Remember, our risk control line is at $5.50 while our profit targets are at $9.50 and $11.00.

Until next time,

Justin Bennett

If you’d like to comment on how you’re doing in the service, or if you have any questions or concerns, please feel free to drop me an email at [email protected]. I’d like to know how you’re doing!

Category: Commodity Trading