Weekly Update: October 22, 2014

| October 22, 2014

Weekly Update: October 22, 2014

 

Big Picture Outlook:

Another wild day for WTI crude…

The commodity dropped to $80.25 in today’s session thanks to a bearish EIA inventory report. For the week of October 17th, oil in storage jumped 7.1 million barrels.

There’s no question crude is still under plenty of bearish influence.

With US production still on the upswing, oversupply worries are front and center. What’s more, global growth worries are still prevalent despite dovish talk from global central banks over the past few days.

But remember, we have a great entry point on our recently released trade in the US Oil Fund (USO) December 19, 2014 $32 Calls. What’s more, we have a tight risk control line, which will trigger if oil breaks below $80 a barrel.

Any way you look at it, the risk/reward is in favor of crude bulls right now.

Keep in mind, the upcoming OPEC meeting has the potential to send crude back to $90 a barrel rather quickly!

So whatever you do, don’t let today’s bearish action in the commodity sway you. It’s normal to see violent market swings when a commodity is in the bottoming process.

Now, let’s get to the rest of today’s 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.

. . . . Occidental Petroleum (OXY) January 16, 2015 $110 Calls

There’s the OXY bounce we were looking for last week! The international oil and gas producer jumped from $83 to $91 within a 5-day trading span.

Now remember, this trade triggered our risk control line a few weeks ago. As a result, conservative investors should already be out of this trade.

If you’re aggressive, consider holding your OXY calls for a continued rebound into year-end.

. . . . ConocoPhillips (COP) January 16, 2015 $80 Calls

COP enjoyed a nice bounce over the past few days as well! The large cap producer rallied from $63.50 to $71 as investors realized just how oversold it really was.

Where COP goes from here largely depends on the price action in WTI crude over the next few days. If the commodity drops below $80 a barrel, COP may give up some of its recent gains.

However, it’s highly likely the $63.50 low from last week was the bottom in this stock.

Keep in mind, COP already triggered our risk control line at $72.50. As a result, only aggressive investors should be holding these calls for a rebound.

. . . . US Natural Gas Fund (UNG) January 16, 2015 $21 Calls

Despite natural gas trading at its lowest levels since December 2013, bulls have yet to make an appearance. That’s likely because the NOAA’s newly released 6-14 day forecast is now predicting unseasonably warm weather for most of the US.

But remember, natural gas is oversold with the start of the winter heating season just weeks away. All we need is a slight change in the weather to send natural gas, and our UNG $21 calls, higher.

Be patient with this trade. We have plenty of time until expiration. Our risk control line is at $19.25 in UNG while our profit targets are $23.50 and $25.00.

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