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Chart of Day: Chevron (CVX) Falls, as Hoped

Jun 04, 2017

Oil bulls just don’t get it.

There’s no real chance of a supply-demand balance, near-term. OPEC has lost control. Supply is increasing with U.S. production picking up steam. Demand isn’t as strong as it should be. OPEC won’t even agree to deeper cuts.

In fact, all they’re willing to do is extend the current deal by another nine months.

That would do much, though, as U.S. production overshadows OPEC cuts.

For those reasons, oil is doomed, near-term. It’s why we recommended shorting shares of CVX by buying to open the CVX July 105 put, as it traded at $2.75. It’s now up to $3.45, as the underlying stock only begins to sell off.

What we’d like to see is failure at triple bottom support with a potential test of a November 2016 low of $102.51. Another way to trade CVX downside is by also buying to open the CVX August 2017 100 put at market prices as well.

Chart of Day: Palo Alto (PANW) Explodes

Jun 01, 2017

On April 17, 2017, we made a bull case for PANW at $112 a share.

It was brutally oversold at support with pivots in MACD, RSI and Money Flow. It was only a matter of time before it began to move again, which it just did.

At the moment, PANW is up $20.50 a share at $139.10 – a $27 gain in less than two months. Had you picked up a call option – let’s use the September 110 call on April 27, it ran from a low of $9 to $30.30, proving how useful options truly are.

If you bought the stock, take your gain. Congratulations.

Chart of Day: The Best Way to Trade Oil Now

May 30, 2017

Oil isn’t looking so hot again.

In fact, at this rate, we wouldn’t be shocked to see $45 a barrel.

There’s still far too much supply with little demand growth. Worse, OPEC has proven itself to be worthless. Oil prices were supposed to run higher on the heels of an OPEC extension.

Traders thought we’d see a return to $60 oil, near-term on hopes an extension would balance supply and demand. Algerian Energy Minister Noureddine Boutarfa even noted that oil prices could move above $55 on the idea that an extension should help clear glut by year-end. Russia and Saudi Arabia noted that by prolonging the production cuts the plan would speed up a market rebalancing.

Oil analysts believed downside risk had been full priced in.

They were all wrong, though.

While an extension will continue to remove 1.8 million barrels a day from the market through March 2018, traders wanted to see deeper cuts. They wanted to see more than 1.8 million barrels a day removed from market. But that didn’t happen.

Now, oil could slip even more with the global community awash in oil stockpiles at record highs. All as U.S. oil production surges against the backdrop of weaker than expected oil demand – an increase that has already offset most of the OPEC cuts to date.

We could also see another 800,000 bpd from Libya, and a potential return to 2.5 million barrels from Nigeria.

In short, there’s little hope for higher oil prices… at least near-term.

One way to trade the situation is by buying to open the CVX July 105 put at market.

Chart of Day: The Worst Thing Any Trader can Do

May 24, 2017

Always be mindful of over-extensions.

After rocketing higher with gold, shares of Randgold Resources (GOLD) for example became aggressively overbought on our momentum metrics – RSI, MACD, W%R.

While many agued that it could keep running with the price of gold, once it hit triple-top resistance with over-extensions on those momentum metrics one of the worst things you can do is ignore in with hopes of higher highs. That’s because as we’ve learned, once those metrics tell us a stock is overbought, eight times out of 10 it will come down. Shares of GOLD are proving that to be true.

It’s now possible that shares of GOLD could now retest double bottom support around $85 a share, where we would look to close a short and go long. One way to consider trading GOLD now is by buying to open the GOLD July 2017 92.50 put at market prices.

Chart of Day: One of the Most Oversold Opportunities

May 22, 2017

Shares of Chicago Bridge & Iron (CBI) have become brutally oversold.

So much so, I’d be shocked if it didn't rebound significantly.

That’s because the worst – in our opinion – has already been priced in.

Nowadays, the stock has become so incredibly oversold I’d be shocked if it didn’t move higher. In fact, MACD hasn’t been this oversold sine early 2015. RSI and Money Flow are deep in oversold territory, as well. We believe that downside is limited and has already priced in bad earnings. Better yet, CBI recently named a new CEO to the board, as well, which could drive the stock higher.

Or, at least… that’s what should happen.

Without risking the house with a -35% stop loss in place, there are two ways we can trade this oversold opportunity. We’re recommending that you buy to open the CBI June 20 call at market, and or the July 2017 20 call at market.

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