Weekly Update: October 21, 2015

| October 21, 2015

Weekly Update: October 21, 2015


Big Picture Outlook:

So far, this week has been rather uneventful for gold and oil…

Both commodities are trading slightly lower as investors await new supply/demand information.

Gold’s case is especially interesting right now…

The yellow metal is trading at $1,167 an ounce this afternoon, which is just shy of the highly important 200-day moving average.

Take a look…

gold prices

As you can see, the 200-day moving average is providing stiff resistance.  Gold had one close (October 15th) above the important line before falling back beneath it.

Can gold punch back through to higher prices?

Here’s my take…

Gold still has a good shot at breaking the 200-day moving average in coming days.  However, an even bigger wall of resistance lays at $1,200 an ounce.

As a result, there’s about $30 of upside potential, versus around $70 of downside potential.  In other words, the risk/reward is not currently in favor of the bulls.

But there is a caveat to this line of thinking…

If new data arrives in coming days supporting the idea that the US Federal Reserve will delay raising rates for the foreseeable future, gold could bust above $1,200 and have a remarkable end of year run.

Bottom line…

Until the yellow metal breaks $1,200, traders have to be very careful on the long side of the market.  After all, gold is still stuck in a steep multi-year downtrend.

But one hint of bullish news and gold could finally break the back of short sellers!

Let’s check in on 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. 

. . . . US Oil Fund $USO December 18, 2015 $15.50 calls

Unfortunately, $USO is closing in our risk control line at $14.15.  While I’m finding additional data to support the idea that crude is indeed forming a long-term bottom, it’s best we stick to our original game plan in this trade.

If $USO trades below $14.15, conservative investors should close this trade to conserve capital.

. . . . Dominion Resources $D November 20, 2015 $72.50 calls

$D has had quite a run the past week!

The utility operator hit our first profit target at $74 in today’s session.  The upturn has our $72.50 calls trading up to $2.35 a contract this afternoon- that’s a 123% gain from our entry.

Be sure to take some profit off the table at these levels.

If you’re aggressive, you can keep holding a portion for our second target at $78.

. . . . Southern Company $SO November 20, 2015 $45 calls

Despite a few worrisome days last week, $SO kept right on truckin’ to our first profit target at $46 this week.  The rally sent our $45 calls up to $1.36 a contract in today’s session, which is an 81% gain from our entry at $0.75 a few weeks ago.

With our first target hit, be sure to collect some profits.  If you’re aggressive, consider holding for our second target at $48!

Until next time,

Justin Bennett

***Editor’s Note***  You’ll find a new trade in your e-mail inbox by the end of this week.  Be on the lookout!

Category: Commodity Trading