Weekly Update: November 12, 2014
Weekly Update: November 12, 2014
Big Picture Outlook:
Thankfully, it has been a fairly uneventful week in the oil market. This is a welcome development after the spectacularly bearish crude downturn in October.
As I write, WTI is trading at $77 a barrel. In case you’re unaware, Wednesday’s regularly scheduled EIA storage report is postponed until tomorrow due to the Veterans Day holiday.
What about natural gas?
A sudden onset of extreme cold sent the commodity surging to $4.50 mmBtu in recent trading. Of course, this is a very welcome rally since we purchased UNG calls in mid-October (more on that below).
How long will the cold last?
Some meteorologists are claiming this artic blast is a freak event, which won’t likely happen again this winter. On the other hand, there are other forecasters predicting we’ll see these abnormal cold snaps with stunning regularity this winter.
Who’s right?
We’ll have to wait and see. But there’s no question that the winter heating season is getting off to a very bullish start for natural gas!
Let’s get to our open position 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.
. . . . US Natural Gas Fund (UNG) January 16, 2015 $21 Calls
Thanks to the phenomenal natural gas rally, UNG hit our first profit target at $23.50 last Friday. But more importantly, our UNG January $21 calls surged to $3.31 a contract as UNG hit our first target.
That’s a 185% gain from our $1.16 entry price!
Remember, both conservative and aggressive investors should close at least a portion of their position when a trade hits our first profit target. But only aggressive investors should consider holding the remaining position for the second target.
Speaking of which…
We still have plenty of time until expiration in our UNG calls and our second target is $25.
. . . . US Oil Fund (USO) December 19, 2014 $32 Calls
Unfortunately, the longer oil stays below $80 a barrel the less likely it is we’ll see our USO calls recover their value. No doubt about it, we need WTI to rally… and soon!
But keep in mind, the highly important OPEC meeting is approaching quickly. Like I said in the original trade alert on USO, I’m expecting the Middle East oil cartel to cut their 2015 production outlook.
If they do, crude should quickly rally back to the high $80 a barrel range.
Now remember, our risk control line was hit last week. As a result, only aggressive investors should be holding these calls for a potential rebound.
. . . . Goldcorp (GG) January 16, 2015 $18 Puts
After a rather precipitous plunge from $1,250 to $1,130 an ounce in recent weeks, gold is seeing a bit of a relief rally. The yellow metal bounced to $1,180 last Friday as shorts took profits off the table.
Due to the recent rebound in gold, GG has bounced considerably off the $17 low set October 31st. As a result, our GG January $18 puts are trading at $0.79 a contract, which happens to be our original entry point.
Now listen closely…
Since these GG puts already ran to a 111% gain, I don’t like the thought of letting this trade turn into a big loser. As a result, I’m adjusting the risk control line from $23 down to $21.20.
If GG trades above $21.20 in coming weeks, I recommend you close this put trade.
To be clear, I still believe there’s plenty of bearish potential for gold due to the raging US Dollar. And if the metal does see continued weakness into year-end, GG will likely follow suit.
. . . . Ultra Petroleum (UPL) January 16, 2015 $25 calls
Our most recent trade is still sitting in neutral. While UPL rallied to $24.50 on Monday, the natural gas producer couldn’t hold its gains. As I write, UPL is trading at $23.50.
Let’s be patient and give UPL time to turn higher. Our profit targets are $26.75 and $29 while our risk control line is at $21.75.
Until next time,
Justin Bennett
Remember, 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
