Weekly Update: January 28, 2015

| January 28, 2015

Weekly Update: January 28, 2015

 

Big Picture Outlook:

This morning’s EIA oil inventory report revealed something remarkable. Thanks to yet another exceptionally large weekly storage build of 8.9 million barrels, US oil inventories are sitting at an 80-year high!

No doubt about it, the US is swimming in crude, and will continue to do so for the foreseeable future.

But here’s what’s really interesting…

While the initial market reaction to the report was bearish, large buyers stepped in to support WTI crude at $44.50 a barrel. As a write, the commodity is down a mere $1 a barrel from last night’s close- not what you’d expect from such a bearish inventory report.

What does it mean?

While it’s unlikely $44.50 is an absolute bottom for crude, it’s beginning to look like much of the crude oversupply situation is already priced into the market.

To be clear…

I’m not calling a bottom in crude just yet. However, it does appear bearish momentum is starting to wane.

Let’s get to this week’s 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.

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

After hitting our first profit target at $23 last week, GDX gave up some ground on the official ECB stimulus announcement. The gold mining ETF dipped as low as $21.13 in Monday’s session.

But here’s the deal…

Investors bought into Monday’s downturn with conviction. As I write, GDX is trading at $22.50. The upturn is a great sign the bullish run for gold miners is far from over.

Now remember, conservative investors should have already collected profits on this trade when GDX hit $23. If you’re aggressive, the odds are growing that GDX continues higher in coming months on additional gold strength.

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

XLE hit our first profit target at $78.00 in yesterday’s session! As a result, conservative investors should be out of this trade with profits. The rally sent our $75 calls up to a $3.00 bid, which is a 57% gain from our $1.90 entry price.

Since these calls expire this Friday, everyone will need to close this trade soon. Remember, for every XLE $75 call you’re still holding at the close this Friday, you’ll own 100 shares of the energy ETF on Monday morning. Of course, XLE must stay above the $75 strike for that to happen.

This was a quick, but profitable trade in the oil patch. Be on the lookout for more of these trades in the future!

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

Since initiating this trade on Monday, silver has essentially traded sideways. The metal has substantial technical resistance to break through at $18.50 an ounce, which is just above current prices.

We may see a few more days of sideways to slightly lower trading action in silver as the market consolidates the recent bullish move from $16 to $18.50.

Keep holding these long-dated calls for higher silver prices in 2015!

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

Gold is stuck in a sideways pattern near $1,290 an ounce. It’s likely we see the yellow metal continues sideways, and possibly trade as low as $1,260 in coming days as the market digests the recent bullish move from $1,200.

Keep holding your long-dated IAU calls for higher prices!

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