Weekly Update: May 6, 2015

| May 6, 2015

Weekly Update: May 6, 2015


Big Picture Outlook:

Well folks, the price of WTI has certainly had a nice bullish run the past few weeks.  The commodity rallied to a new 2015 high at $62.58 this morning after the EIA revealed inventories fell by 3.9 million barrels last week.

That’s the first time crude inventories have fallen from week to week since early January 2015.

But here’s the deal…

Despite the seemingly bullish news, traders sold into today’s highs.  WTI finished the day with a gain of $0.23 a barrel after being up nearly $2 directly following the EIA report.

This price action tells me oil bulls are getting tired.

Not to mention, WTI is running into a very important resistance trend line.

Take a look…

Crude Oil

Given this strong barrier to higher prices (red line), it’s likely the relatively smooth oil price upturn we’ve seen the past few weeks is coming to an end.

Let’s see what that means for our open positions…


Portfolio Highlights:

Editor’s Note: I won’t update every open position in every update.  I focus on the positions with significant news or price movement.

. . . . Freeport McMoran $FCX May 15, 2015 $19 calls

$FCX rallied to our second profit target at $23.50 in recent trading.  The strong upturn sent our $19 calls exploding to a $4.50 bid on May 1st.  That’s a sweet 298% gain!

Both conservative and aggressive should have already closed the majority of this position for strong profits. 

If you haven’t collected your gains yet- do it soon.  Since expiration is just around the corner, it’s wise to close this trade for good.

Congratulations on a great trade!

. . . . US Oil Fund $USO May 15, 2015 $19.50 puts

As you know, $USO ran above our adjusted risk control line at $20.50.  That means conservative investors should have closed this trade for a small loss.

However, if you’re aggressive, you may want to hold on to this position.  There’s a very good chance crude turns lower in coming sessions due to the factors laid out above.

. . . . Marathon Oil $MRO July 17, 2015 $30 calls

This trade from early April gave us solid gains.  The oil producer hit our first profit target at $30.50 on April 15th, and our second target at $31.50 on May 5th.

At the very least, you should have been able to close this trade for a gain of at least 65%.  If you held for our second target, you may have been able to sell some at $2.21, which is an 84% gain from our entry.

Since both our profit targets have been achieved, let’s close this trade for good. 

Nice job!

. . . . Oneok $OKE July 17, 2015 $50 calls

Unfortunately, $OKE completely fell apart today.  The company reported earnings that were far short of analyst expectations.  As a result, shares of the oil and gas storage/pipeline provider sank below our risk control line at $45.90.

Given the questionable price outlook in crude, I think it’s wise for both conservative and aggressive investors alike to completely close this trade. 

. . . . Oasis Petroleum $OAS May 15, 2015 $15 calls

Here’s another trade that has treated us well recently.  $OAS ran above our first profit target at $18 on April 15th, giving us gains of 146% on our $15 calls.

But since then, $OAS has been a bit boring.  The producer is stuck in a trading range in the $17 area.

Listen closely…

With expiration just around the corner, it’s unlikely we see any additional gains out of our $OAS calls.  As a result, go ahead and close any remaining calls you may have.

Congratulations on a solid trade!

. . . . WPX Energy $WPX May 15, 2015 $12.50 calls

Thanks to a better than expected Q1 earnings report, $WPX is toying with a breakout over $14 a share today.

However, we’re quickly running out of time with this trade.

Since expiration is just around the corner, we’ll need an additional bullish move out of $WPX soon.  We’ll need the oil and gas producer to rally over $14.25 ($12.50 strike price + $1.75 premium paid) by expiration to get us out of this trade breakeven.

If you’re still in this trade, consider holding $WPX for a bit longer.  We may just get the breakout we’re looking for!

Just remember, these calls are currently trading in-the-money.  So if $WPX holds above $12.50 by the end of next week, you’ll have to exit this position to avoid being exercised.

. . . . Southwestern Energy $SWN June 19, 2015 $28 calls

$SWN surged just over $29 a share on May 1st.  The sudden rally immediately sent our $28 calls rallying to a $2.33 bid, which is a 92% gain from our $1.21 entry just the day before!

Pretty amazing return for just 24 hours!

We have plenty of time left in this trade, so keep holding for higher prices.


***Editor’s Note***  I will be out of the office all of next week.  You’ll get another weekly update from me on May 20th.

Category: Commodity Trading