Weekly Update: September 30, 2015

| September 30, 2015

Weekly Update: September 30, 2015

 

Big Picture Outlook:

This morning’s EIA oil inventory report was bit of a mixed bag…

First of all, the government agency reported US crude inventories rose by a rather hefty four million barrels for the week of September 25th.  WTI crude immediately responded with a quick $1 a barrel drop to $44.80 on the news.

But then something interesting happened…

Just as fast as the commodity plummeted to the day’s lows, it turned around and rallied right back to the day’s highs at $45.80.

What happened?

Investors also learned that US oil production dropped by another 40,000 barrels a day from September 18th to the 25th.  This US production downturn is a trend we started to notice in July.

What’s all this information mean?

While the US is still producing crude at multi-decade high levels, the cracks are starting to show.  US production is slowly but surely turning lower as the dramatic crude price downturn takes its toll on US oil producers.

For more on what to expect from the crude oil market in coming weeks, let’s get to a few open position updates.

 

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 November 20, 2015 $14.50 calls

Today’s mixed bag of inventory and production data did little for the price of WTI.  The commodity remains range bound at $45 a barrel.

Now keep in mind, conservative investors already collected a quick 50% profit off these calls when $USO hit our first profit target at $16.00 on August 31st.

If you’re aggressive, keep holding a few of these calls for the distinct possibility WTI breaks higher from this trading range and makes a run for $50 a barrel.

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

$D is still working on the $70 resistance level I outlined in our most recent trade alert.  Should shares of the electric and natural gas utility break above $70, there’s a very good chance it quickly runs to the $74 area.

Our $72.50 calls are still trading where they were at the time of our trade alert.  So if you haven’t already, go ahead and add these calls to your option portfolio.

Our profit targets are at $74 and $78, while our risk control line is at $68.50.

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

$SO is making a move…

Shares of the utility company broke firmly above the $44 resistance level in today’s session.  Another day of strong bullish action and these shares will have a very good chance of achieving our first target at $46!

In the meantime, our $SO November $45 calls have already jumped to a $0.91 bid, which is a 21% gain from our entry at $0.75.

Keep holding these calls as $SO looks poised for a run to $46, and possibly to our second target at $48.

Our risk control line remains at $42.70.

Until next time,

Justin Bennett

***Editor’s Note***  I’ve recently joined the Twitter revolution!  In case you’re unaware, Twitter is a remarkable tool for distributing timely market information.  Throughout each trading day you’ll find me posting commodity related articles and information that will help you get a handle on the markets.

You can follow me by searching for my twitter handle: @CommodityRes

See you in the Twittersphere!

Category: Commodity Trading