Dear Reader,
Yesterday, I went into my live room at Flashpoint Trader and showed members a chart I use to call the bottom for various sectors. This was a straight head-banger victory.
Today, oil prices are ripping higher off oversold conditions. West Texas Intermediate (WTI) crude surged 4.2% this morning, while the London-traded benchmark Brent crude added nearly 4%.
Now, the narrative goes that oil prices are rebounding due to easing concerns over recessionary demand and the U.S. banking sector strain.
But the narrative isn't what matters...
What matters are the technicals - I'll show you what I mean in a second, then I'll show you an easy, low-risk trade to make on one of my favorite tickers in the space.
It's a secret typically reserved for institutional clients...
How We Found the Oil Bottom
I use a daily chart on the MicroSectors U.S. Big Oil Index 3X Leveraged ETNs (NRGU) .
This index provides investors with returns that match triple-leveraged exposure to the underlying performance of the Solactive MicroSectors U.S. Big Oil Index, which itself tracks the top 10 oil-and-gas companies in the U.S.
The list of names includes the usual suspects. There's Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), Occidental Petroleum Corp. (OXY), and Valero Energy Corp. (VLO), among others.
Take a look at the Relative Strength Index (RSI) and the Money Flow Index (MFI). In the case of both the RSI and the MFI, the two indices are down at oversold levels that we haven't seen since July 2022, September 2022, December 2022, and March 2023.
This push into oversold conditions is a bear's worst nightmare because this is where institutions tend to cover their short positions. But we love this situation because it gives us a chance to trade bull put spreads on a wealth of stocks we want to own - cheap.
As I've explained, Occidental (OXY) is our favorite play in these conditions. You've got an opportunity to sell puts below the price where Warren Buffett has bought shares over the last 12 months.
Profitable as the OXY play is, though, it's just one part of a much bigger story - one with immense upside potential. I know it, Buffett knows it, and now you know it: With oil prices bottoming out, you need to dig deep into the value plays that we opened last week. Permian Resources Corp. (PR), a $10 stock ticker I gave away as part of a basket of five high-upside-potential Permian oil plays, is ripping higher today - adding another 4.8%. Certain PR options plays are up nearly 20 times that right now. And I think, in terms of the stock alone, there is at least 20% upside in the months ahead. Check out this special presentation, where I'll show you how to trade it and give you the chance to get the other four tickers.
Today's Momentum Reading
WORLD'S BIGGEST INDICATORS
Recap: The World's Biggest Indicator (Momentum) is Red...
There's been a hefty decline in selling in this market - and we are seeing some improvement in momentum today. That said, tech stocks are selling off in very specific parts of the sector today. I'm still urging caution today given the state of affairs. The jobs report was mixed.
Structured Bull Spread
It's not too late to trade Occidental (OXY). We haven't seen a purchase by Warren Buffett, but I wouldn't be shocked if the news comes in. So, how about a nice income play with plenty of protection? Buy-to-open the OXY June 16, 2023 $50 call, and sell-to-open the OXY June 16, 2023 $52.50 call.
You're putting up $222 to make $28. That's a 12.6% return, or 107% on an annualized basis. (join me in Flashpoint Trader to learn how to increase your probability of profit when trading options)
Oil's Not the Only Smart Commodity Play Right Now
This morning I warned everyone to unload their speculative, frothy "zombie" stocks and move into "hard" assets - oil, of course, but also minerals and metals - especially gold.
Good luck trying to put your hands on whatever "value" there is in tech stocks. At a time like this, real assets - "stuff" you can actually hold - are some of the best you can own, and gold is up there with the best of the best. Buy as much as you can.
But, while you do that, keep an open mind about ways to make money on the yellow metal.
Yes, gold was virtually dead during the "Silicon Valley decade" of overvalued tech stocks, but it's about to wake up in a big way.
Cheers,
Garrett
The post I Called Oil's Rebound on Air Yesterday - Here's How to Trade It appeared first on Midday Momentum.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.