Closing an Oil Winner (FCX)

Before we dive into the cheesecake, a quick word on oil. We’re of the opinion that this week will tell the tale for oil for the next four to six months, at least. The charts show that both the United States Oil Fund (NYSE:USO) and the Select Sector SPDR Energy ETF (NYSE:XLE), the first a proxy for crude, the second a measure of big cap oil producers and marketers, are presently at tipping points, moments in their investment trajectories that could just as easily bring them into a deep swan dives – bear markets the likes of which we haven’t seen in the oil patch for seven years – or pull them higher into rallies that jolt the oil bears out of their languor like a metal spike in the shin. What’s most interesting about these two wildly divergent possibilities, is that the technicals are pointing toward lower prices for oil and the oil producers, while fundamental considerations – including the possibility of a widespread war that engulfs the entire Arabian peninsula – are militating toward much higher prices. Hmm… Let’s begin our analysis with a gander at the technical picture – This is the Select Sector SPDR Energy ETF…

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Oil Back On The Rise

With last Friday’s options expiry we have six trades to report, a few of which put blockbuster gumbo in our pockets. We run them down for you now, one by one. Our first report is from our September 30th trade. The letter was called How to Profit as America Goes to Hell, and in it we recommended you buy CALLs on fast expanding restaurateur BJ’s Restaurants, Inc. (NASDAQ:BJRI), a company with a market cap in excess of a billion dollars that operates 150 restaurants focusing on deep-dish pizza and beer. Our argument at the time was that an entire cohort of unmarried twenty somethings were living at home, making a reasonable living and therefore had more funds to spend on slightly upscale fast food. BJ’s, we figured, was as good a bet as any. So we bought BJRI April 45 CALLs for $1.75 and sold the April 30 PUTs for $0.85 to offset the cost. Our total debit on the trade was $0.90 per pair traded. A month later, on October 28th, the stock popped, and as we reported in Making a Quick Killing, we sold the CALLs for $3.00. Last Friday the PUTs expired worthless, so our total take…

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A ‘Rising Sun’ Pairs Trade

Before all else, we’re going to revisit and close down a profitable trade. It’s a pairs move that we launched about six weeks back in a letter called Apples Fall and Cars Go Vroom!, in which we recommended he following action – buying TSLA April 230 CALL for $3.90 and selling AAPL April 135 CALL for $4.10. Every pair traded credited you $0.20. Our thinking at the time was very simple – technically, AAPL was due for a slowdown, having just achieved ‘overbought’ status by striking the RSI 80 level. TSLA, by contrast looked to have bottomed after hitting long term support and seemed to be headed higher. What happened since? Our prognosis for the two stocks proved accurate. Unfortunately, we didn’t give the set a long enough time horizon to diverge as we’d have liked. At the end of this week, both options will expire, and we’ll take in some cash – but it won’t be a wham-doggy affair. The numbers look like this – The TSLA CALL is currently at $0.19 and the AAPL CALL is trading for a mere pennies. Our advice is to take the $0.19.  As measly as it may sound, when you add it to the original $0.20…

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Clean Shaven Legs Review

Well, we did it. We arrived at the end of the year with our limbs intact, our pocketbooks bursting with newly won cash, and our minds… well… sort of. Anyway, we thank the Great One (not Gretzky) for his help, despite the fact that our mid-year predictions for most markets were weaker than usual. And we take a moment now to review those calls and, of course, to reward those of our readers with the keenest prognosticating acumen with the used Q-Tips that we promised them. Congrats to all who participated!   Before we announce this year’s victor, let’s look back at our own efforts. We’ll rhyme ‘em off, and you write in to comment on our performance. Gold – We wrote – “Expect GLD to be at her former lows of $114 when the bells of New Year come haunting.” In fact, December 31st brought a closing price of $113.58 for the metal’s stock proxy. Normandy calls that an A+ performance. Silver – Our words – “Stepsister silver will not likely see as gruesome a future as gold. We’ll throw out an $18 figure for year end.” Not as good with silver. We give ourselves a C. SLV closed…

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Short Term Profits on an Oil Bounce (XLY, SPY, XOM, USO)

We have an open trade that requires your attention. And depending on what kind of personality you have, it could go in two entirely different directions. It was a trade we opened in mid-August in a letter called The Outperformance Game. There, we spoke about the lack of excitement in the consumer discretionary sector; a corner of the market that generally fares well when consumers are confident and the economy is humming without worry. At that time it wasn’t the case, but we suspected the situation would change, and the discretionaries, as represented by the Select Sector SPDR Consumer Discretionary ETF (NYSE:XLY), would outperform the S&P 500. The trade consisted of a long XLY CALL purchased with funds garnered from a short SPY CALL ( the SPDR S&P 500 ETF). And what happened?   We bought the XLY December 69 CALLs for $1.33 and sold the SPY December 205 CALLs for $1.44, pocketing a credit of $0.11 per pair traded. And today the XLY’s are trading for $2.30, while the SPY’s are fetching $2.55. Take a look at XLY’s chart – The technicals show a tremendous run-up to new highs posted last Friday (in red), and a sharp decline on…

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Horrifying Research Reveals Rally-Ready Market

It’s time again to peer into the darker corners of the equity market, where only the brazen and stout of heart dare to tread. Please do follow along. We’re going to look at three distinct sectors of the market today in an attempt to build a composite picture of where things are headed over the near and intermediate term. It’s an approach we’ve had good success with for a number of years. Perhaps, you’ll read on and gain something in the process. Here we go… Our first stop is the oil patch, where we often head to get a read on potential inflationary pressures. The rationale is – as goes the price of oil, so, too goes the cost of most goods and services. Why? Because oil price inflation is nearly always a function of a hot global economy. When factories are producing a-go-go and the increased production requires more fuel, and shippers are therefore more active, you can bet that consumers are also spending their money like nobody’s business. To get a take on whether that’s happening, we’ve charted oil, as represented by the United States Oil Fund ETF (NYSE:USO), against the world’s largest producer, Exxon Mobil (NYSE:XOM). We’ve…

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