Weekly Update: February 4, 2015

| February 4, 2015

Weekly Update: February 4, 2015

 

Big Picture Outlook:

Thanks to another wildly bearish EIA inventory report this morning, WTI crude is crumbling back below $50 a barrel in today’s session.

Of course, today’s 6% downturn isn’t really a surprise.

As you know from yesterday’s trade alert, I suspected the commodity would stay in the low $50 range for some time to come. Given the severity of today’s selloff, it looks like we may even see the mid-$40 range again.

But here’s where it gets interesting…

Our newly established call position in WPX Energy (WPX) is holding up nicely. In fact, the oil and gas producer is trading slightly in the green as I write.

Why the divergence?

All energy investors really need to know before they start scooping up deep value names like WPX is how far oil will ultimately fall.

And since WTI rocketed higher by 20% this week on short covering, we’re likely getting close to a bottom.

This is precisely why I’m on the lookout for high quality oil names that are trading at a big discount. Keep an eye on your e-mail inbox for more opportunities in coming weeks!

 

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.

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

This week’s oil rally sparked some intense buying interest in XOM. The world’s largest oil company surged from $86 to $92 in recent trading as investors bet on an oil bottom.

As you may remember, we initiated this trade in early December. Within a day of the trade alert, XOM ran to our first profit target at $94.50.

Conservative investors should have booked a quick profit of around 20%.

But then the bottom fell out of XOM. Shares tagged our $89.90 risk control line a few days after our first profit target was hit. As a result, you may have chose to close this trade completely- no harm, no foul, if you did.

Now here’s the deal…

If you’re still in a portion of these February $92.50 calls, there’s a good chance they go in-the-money soon. If they do, you’ll have to keep a close eye on them as expiration arrives later this month.

This has been an extremely volatile trade. But with oil showing signs of a bottom, there’s a good chance XOM is ready for a nice bullish run.

. . . . Market Vectors Gold Miners ETF (GDX) March 20, 2015 $21 calls

GDX is forming a very interesting trading pattern. Ever since the gold miner ETF hit our first profit target at $23 a few weeks ago, it has traded in a sideways pattern in the $21-$22 area.

Take a look…

It looks as though GDX may be forming a bullish continuation pattern (red lines). These price patterns tend to form after a substantial rally, which we had in early 2015.

If GDX breaks above the top red line in coming weeks, we’ll likely see the ETF make a bullish run towards our second target at $26!

Now remember, conservative investors should have already collected gains of around 90% on this trade when GDX hit $23. If you’re aggressive, the pattern above could play out for more profits in coming weeks!

. . . . iShares Silver Trust (SLV) January 15, 2016 $18 calls
. . . . iShares Gold Trust (IAU) January 15, 2016 $12 calls

Gold and silver are giving up some ground in recent trading. Gold is trading at $1,263 while silver is crossing the tape at $17.40 in today’s session. These prices reflect a 3% and 6% respective retraction from the recent weekly highs.

Unless gold and silver drop substantially in coming weeks, it’s likely these recent pullbacks are merely a consolidation of the early 2015 rally.

Remember, these are very long-dated call trades. Don’t let every little uptick/downtick in gold and silver worry you.

Keep holding these calls for the potential of higher precious metals prices in 2015!

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