Weekly Update: November 19, 2014

| November 19, 2014

Weekly Update: November 19, 2014

 

Big Picture Outlook:

Today’s Federal Reserve minutes revealed the US Central Bank is content with keeping interest rates low for a “considerable time”. While there wasn’t really any new information in this afternoon’s release, the notes were considered dovish by investors.

What does that mean for commodities?

Dovish rate talk will hopefully start bringing the US Dollar back to earth. As you may know, the currency has been in rally mode since July. A turn lower in the Dollar index will drastically help the bullish case for commodities in coming months.

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

UNG rallied over our first profit target at $23.50 again today. So if you missed your first chance to collect profits in this trade, you got another today!

Today’s UNG rally sent our $21 calls soaring to a $3.48 bid- that’s a 200% gain over our entry price at $1.16.

If you’re aggressive, keep holding your remaining UNG calls for our second target at $25. It’s a long shot, but the way this winter is starting out, I won’t be a bit surprised if natural gas rallies to $5 by mid-January!

. . . . US Oil Fund (USO) December 19, 2014 $32 Calls

Believe it or not, crude is still lingering around $75 a barrel. As you may know, there are plenty of theories surfacing about whether OPEC will cut production at their November 27th meeting.

Some analysts say the oil cartel will have no choice but to cut (my opinion also). But others insist Saudi Arabia is more concerned with their market share than the economic suffering other OPEC members are dealing with in this low price environment.

Despite the uncertainty, one thing is becoming abundantly clear…

Investors aren’t willing to bid crude prices higher without confirmation of this vital production cut. Looks like we’ll be waiting until the end of next week for the next big move in the crude markets.

Remember, USO hit our risk control line. That means only aggressive investors should be holding the USO $32 calls for a potential rebound.

. . . . Goldcorp (GG) January 16, 2015 $18 Puts

Unfortunately, value investors are saving GG from collapse. Over the past few days, the gold miner has slowly but steadily risen from the early November low of $17.00.

Helping GG’s case is the fact gold is recovering from its early November selloff. As I write, investors are in an intense battle for the $1,200 an ounce area.

Due to this bullish turn in sentiment, GG hit our adjusted risk control line at $21.20 yesterday. As a result, I recommend everyone close this trade. Since these puts already ran to a 111% gain a few weeks ago, I don’t like the thought of letting this trade turn into a big loser.

. . . . Ultra Petroleum (UPL) January 16, 2015 $25 Calls

Despite the gains in the natural gas market, UPL is stuck in a trading range between $24 and $22. We need a strong, high-volume break of $24 to really get this trade moving in the right direction.

Remember, our profit targets are at $26.75 and $29.00 while our risk control line is at $21.75.

. . . . Silver Wheaton (SLW) December 19, 2014 $25 Calls

Here’s a trade from late August that’s making moves. Thanks to a sudden burst of bullish sentiment in precious metals, SLW is jumping to multi-month highs at $21.

The recent rally has our SLW December $25 calls recovering a bit of their value. Of course we’ll need the miner to rally to $26.47 ($25 strike + $1.47 premium paid) in order for this trade to get back to breakeven.

While it may see unlikely, it’s not out of the realm of possibility. If you’re still holding these calls, you might as well keep doing so into expiration in December.

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 [email protected]. I’d like to know how you’re doing!

Category: Commodity Trading