Weekly Update: February 5, 2014

| February 5, 2014

Weekly Update: February 5, 2014

 

Commodity Watch:

As you may know, the highly important US Nonfarm payrolls report is this Friday at 8:30 am.  Analysts are expecting January job gains of around 180,000. 

Why should you care?

If the data falls short of expectations, we could very well see gold and silver break to higher prices.  These metals have been trading marginally higher over the past few days on renewed global growth worries.  If this Friday’s data confirms those fears, we could have a precious metals rally on our hands.

On the other hand, if job gains are strong, don’t be surprised if precious metals head back towards the recent lows.

Let’s look at our open positions…

 

Portfolio Recap:

. . . . US Natural Gas Fund (UNG) April 2014 $21 Puts

Natural gas made another run at multi-year highs this morning.  With another wintery blast expected to hit the US over the next 6-10 days, investors were jumping at the opportunity to push the commodity upwards.

But here’s the deal…

Natural gas only stayed at these nosebleed levels for the first five minutes of today’s trading session.  After that, the commodity spent the rest of the day trading downward.  In fact, the March contract closed at $5.12 mmBtu- $0.40 below where it started the day.

What’s it mean?

Traders were using this morning’s pop as a selling opportunity. 

While I can’t guarantee we won’t see another pop in natural gas, this morning’s highs won’t likely be broken… at least not this winter.

For now, keep holding the April $21 UNG puts along with the April $23 puts we opened late last week. 

. . . . US Oil Fund (USO) February 2014 $33.50 Calls

As you may have noticed, the equity markets are experiencing quite a correction.  Over the past few weeks, the Dow, S&P 500, and Nasdaq have all dropped precipitously thanks to fresh global growth worries.

However, WTI crude is still holding near multi-week highs at $98 a barrel.  The fact that oil is staying strong in the face of growing uncertainty in equity markets is a bullish sign for the commodity.

As you know, our USO $33.50 calls expire in a few weeks.  And as of today, we’re sitting on a 64% gain in this trade. 

But let’s not close it just yet…

We have a very good chance of oil continuing higher to our second profit target at $100 a barrel once the equity market correction runs its course.

Remember, conservative investors should have already closed this trade for solid gains.  If you like to take a bit more risk, consider holding the USO $33.50 calls for higher prices.

 

Category: Commodity Trading

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