≈ This is a good thing
Crude oil is taking it on the chin this week, suffering its first break of the 20-day moving average since mid-May. The correction is causing no shortage of register ringing across the energy sector, which isn’t helping the Russell 2000.
There is a silver lining to the shellacking, though. Oil prices weren’t going to run to $100 without deeper retracements along the way. Dips like this shake out the weak hands and ultimately create a more sustainable trend. Lower prices and the accompanying fear they generate creates more profitable opportunities at selling puts or put spreads.
In the Bear Market Survival Guide, we refer to this as a “Fade the Fear” trade.
Watch both XLE and XOP closely over the coming days to see if we can get some oversold conditions near major support zones to allow for selling far OTM puts. With today being the first day of a support break, it will be a better setup if we can get an additional few days of selling.
Chart of the Day
The Energy Sector (XLE)
This is the first significant support break for XLE since April. The last correction eventually proved a buying opportunity. I suspect this one will too. Color me interested if prices drop far enough to let us sell puts near the 200-day moving average for a modest ROI.
Video of the day
The Queens Court
In this week’s edition of the Queens Court, the coaches bring separate trading picks for Coach Emily to review including Canadian Solar, Palo Alto Networks, and FireEye. Will she accept the trade ideas or will she lop off the coaches heads?
Traders Lounge 11 AM EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
Tackle 25 MasterMind Group 8:30 PM EST
Join Greg Holmes tonight as he hosts the monthly Tackle 25 MasterMind Group
Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day and fun in a way that only Matt and Tim can deliver.
Trade Masters 7:00 pm EST
Join us for a special webinar with the coaches where they’ll analyze some trade setups.
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