Weekly Update: January 21, 2015

| January 21, 2015

Weekly Update: January 21, 2015

 

Big Picture Outlook:

Tomorrow could be a very big day for the markets…

Rumor has it the European Central Bank (ECB) is set to announce a massive bond-buying program. According to various sources, the ECB is ready to start buying 50 billion euros a month of various European government bonds.

The potential monetary stimulus comes as the European Union is fighting a stubbornly weak economy. In fact, recent CPI readings reveal deflation is starting to rear its ugly head in the EU.

Without question, the ECB can’t stand idly by as the EU slips into a deflationary spiral.

What does the potential ECB stimulus mean for commodities?

Investors have been rushing into gold for the past few weeks in anticipation of ECB action. Depending on the actual size of the stimulus, we may see further upside for the yellow metal in coming weeks.

As far as oil goes, both WTI and Brent are still bouncing around the $46-$49 area. There’s a possibility we see at least a short-term rally in crude if the ECB’s stimulus plan gives investors hope the EU economy will strengthen.

Bottom line…

Be on alert. We may see some outsized moves in the markets tomorrow!

 

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 spiked past our adjusted risk control line at $11.75 on Monday. As a result, everyone should be out of this trade. Remember, we achieved 100% gains in this trade in December 2014.

This trade is officially closed.

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

What a week for GDX!

The gold miner ETF jumped to our first profit target at $23 yesterday and this morning. The rally sent our $21 calls soaring to a $2.85 bid, which is a 93% gain from our $1.47 entry!

Since our first profit target was hit, conservative investors should have already taken profits off the table.

If you’re aggressive and still holding these calls, tomorrow’s ECB announcement will very likely add some intense volatility to GDX. While there’s a possibility GDX jumps higher in response to the ECB news, it’s also possible investors sell into the announcement. (Buy the rumor, sell the news!)

Either way, only aggressive investors should be holding these GDX calls for higher prices!

. . . . Energy Select Sector SPDR (XLE) January 30, 2015 $75 calls

Something very interesting is happening in oil stocks this week. Despite another hefty downturn in crude prices yesterday, oil producers are holding up well. In fact, XLE is breaking strongly higher in today’s session and is well on its way to our first profit target!

As I write, our XLE calls are trading at a $2.56 bid, which is a 34% gain from our $1.90 entry last Friday. Not bad for a few days’ work!

Remember, if our first target at $78 is hit, conservative investors should take profits. Aggressive investors may want to hold some calls for our second target at $80.

Now listen closely…

Due to the limited time we have in these calls (they expire on January 30th), I’m moving our risk control line up to $74.50 from $72.50.

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 CustomerService@CommodityTradingResearch.com. I’d like to know how you’re doing!

Category: Commodity Trading