Weekly Update: January 13, 2016

| January 13, 2016

Weekly Update: January 13, 2016

 

Big Picture Outlook:

It wasn’t that long ago the thought of oil trading at $30 a barrel was deemed as crazy talk.  As you may remember, the commodity was trading at over $100 a barrel as recently as July 2014.

But look where we are now…

The price of West Texas Intermediate (WTI) briefly touched $30 in yesterday’s trading session.

Of course, the remarkable downturn of the past year and a half comes thanks to numerous bearish factors.  Most notably, swelling global supplies and questionable global economic growth.

When will this remarkable downturn end?

With Saudi Arabia still pumping oil at full throttle and Iran just days away from putting even more supply on the global marketplace, it’s not out of the realm of possibility to see prices at $25 a barrel in early 2016.

However, crude in this price range is a phenomenal long-term buying opportunity.

Unless there’s a major global economic downturn coming later this year, I believe crude in the $20 range will be short-lived.  Be on the lookout for new trades with this thesis in mind in the near future!

 

Portfolio Highlights:

Just a quick note: I won’t update every open position every update.  I focus on the positions with significant news or price movement.

. . . . Freeport McMoran February 19, 2016 $9 calls

$FCX is getting clobbered due the fact copper fell below $2.00 a pound for the first time since 2009 earlier this week.  With the world’s largest copper miner in freefall, the odds are dwindling quickly for a rebound big enough to get these calls back on track.

Remember, $FCX hit our risk control line at $7.50 on December 7th.  As a result, only aggressive traders should be holding these calls for a potential rebound.

. . . . Newmont Mining $NEM January 15, 2016 $21 calls

It looks as though we’re going to see these calls expire worthless this Friday.  Even gold stocks are having a hard time avoiding the bearishness taking over the major indices right now.

Keep in mind, only aggressive investors should still be in these calls since the risk control line at $18.50 was hit on December 14th.

 . . . . Southern Company $SO February 19, 2016 $47 calls

$SO is holding up quite well in the face of extreme broad market bearishness.  Of course, it isn’t all that surprising as utilities typically outperform in times of market uncertainty.

We still have plenty of time left in this trade so let’s keep holding these calls for higher prices!

. . . . ConocoPhillips $COP January 15, 2016 $57.50 calls

Here’s another call trade from late last year we’ll have to chalk up in the loss column.  $COP, along with the shares of most oil explorers, has been absolutely decimated the past month.

Of course, oil falling to 12-year lows in recent trading isn’t helping matters.

While there’s no question a large swath of small- and mid-cap oil companies are in a serious financial bind right now, top-tier players like $COP and $XOM will survive and then thrive in the next bullish cycle.

Be on the lookout for long opportunities in best of breed oil producers in coming months!

. . . . SPDR Gold Trust $GLD March 18, 2016 $106 calls

Gold pulled back to test the top of its December trading range the past three days.  Given the current technical setup, a bullish run to the $1,150 an ounce area looks likely in coming weeks.

Keep holding these $GLD calls for higher prices!

 

Category: Commodity Trading