Weekly Update: January 14, 2015

| January 14, 2015

Weekly Update: January 14, 2015

 

Big Picture Outlook:

This morning’s EIA crude oil inventory report was another punch in the gut for bulls. For the week of January 9th, US crude stocks rose by 5.4 million barrels. That’s a big contrast from the 3.1 million barrel draw reported last week.

Thanks to this morning’s data, bears will likely remain in full control of the crude market for the foreseeable future.

What about gold?

In a surprising turn of events, gold is one of the stronger commodity performers this year. The commodity is up 4.6% year-to-date and is holding up very well considering the ongoing US Dollar strength.

Let’s get to the updates…

 

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.

. . . . Barrick Gold (ABX) February 20, 2015 $10 puts

ABX is back on the defensive. The miner is nearing our first profit target at $10 today thanks to a massive selloff in the copper market. In case you’re unaware, Barrick paid $7 billion for copper producer Equinox in 2011.

At the time of the sale, copper was trading at all-time highs over $4.50 a pound. Fast-forward to today and copper is sinking below $2.50 a pound.

Needless to say, Barrick’s purchase of Equinox was ill timed.

Remember, we already had a chance to collect 100% gains in these puts a few weeks ago. If you’re still holding a few contracts, keep doing so. The odds are growing that we see ABX sink below $10, and possibly to our second target at $9, by our expiration next month.

Keep in mind, the new risk control line for this trade is at $11.75.

. . . . Oasis Petroleum (OAS) January 16, 2015 $13 calls

Thanks to the ongoing weakness in crude, OAS is sinking back below our $13 strike price. With option expiration arriving this Friday, you’ll need to watch this trade closely.

If the Bakken oil producer rallies above $13 by Friday’s close of trading, you’ll need to exit this trade. If you don’t, you’ll wind up owning 100 shares of OAS on Monday for every put contract remaining in your account on Friday.

On the other hand, if OAS closes this week below $13, these puts will expire worthless.

Now remember, we caught a fantastic OAS rally in December. Even if you’re conservative, you should have been able to collect gains of at least 200%!

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

Thanks to the hefty selloff in the broad markets the past two days, gold miners are succumbing to a bit of weakness. However, GDX jumped to multi-month highs over $21.75 earlier in the week.

The rally sent our $21 calls up to a bid price of $2.03 on Monday. That’s a quick 38% gain from our entry point at $1.47 on January 6th.

As long as gold stays bid, I suggest you keep holding these calls for higher prices. Our profit targets are at $23 and $26, while our risk control line is at $18.20.

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