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XLE

Update USOIL: $61.50 first, then $52Commodities are typically the last asset to peak during a cycle. We typically interest rates peak first, a couple of months later that followed by equities and a couple of months after equities we see commodities peak. Commodities such as crude oil, are part of the contraction phase in the cycle, the higher the price rises it begins to acts as a tax on consumers and that begins the early recession phase. For that reason, I have marked this rally in crude as a wave A of a bigger corrective pattern.
OANDA:WTICOUSD
by UnknownUnicorn266486
XLE - Bearish Inside Bar Pin Bar Fake OutAn inside bar / pin bar fake out pattern has formed on the XLE weekly chart. This pattern has formed just below a key resistance level as well as the 50% retracement of the last swing high/low, which is exactly the area we want to see this form. One negative with this setup is that price has formed a very sharp v-shaped reversal off it's lows. That doesn't mean that the pattern is untradable but it does mean any trades taken here need to be aggressively defended, and profit targets not be too aggressive.
AMEX:XLEShort
by krugman87
Subdued Volatility Boosts Crude, But Will It Last? #oil #oott Oil has also seen a dramatic decline in volatility with the OVX down 35 percent over the last month versus an eight percent decline in the VIX. But, prices are beginning to stagnate across cyclical drivers as the macro data out of China and Europe continue to decelerate. In October: "There is currently a 19.8% premium versus the 20-year seasonality , and there's over a 24 percent gap from where crude currently stands and the 5- and 10-year seasonality , respectively. Looking at the futures market, large speculators positioning (on a 5-year percentile) has been sloping lower as price diverges. However, now growth is expected to slow along with inflation which is a bad mix. I have been pointing out since early summer, my DRIP-model (disinflation/reflation/inflation proxy in pink) has been pointing to lower-lows in U.S. inflation . In turn, consumer prices fell from a five-year high of 2.9% to 2.3% Given how market conditions are building, and the recent action in crude, the U.S. could be facing inflation under 2% and that has serious implications when concerning Fed policy." The 20-year seasonality for WTI is negative from September to January with October and November being to steepest at -1 and -1.2 percent, respectively. January's seasonality performance is -.7 percent with current prices trading at a 13.1 percent premium to the 5-year average. Furthermore, today's EIA inventories report saw a massive build of 7.97 m/bl build v. 42,000 drawdown expectation and 2.68 m/bl draw in the following week. This was the largest build since November 15.
NYMEX:CL1!
by TheMacroStrategist
THE WEEK AHEAD: TAX LOSS TIME; OIH/XOP/XLE, XRT, JNKWith but a few trading days left in 2018, it's time to consider taking tax losses in non-tax deferred accounts Personally, I flattened out of virtually everything on Friday, taking my lumps here particularly in my SPY, QQQ static, defined risk core positions in this fairly atypical year-end sell-off so that I can start off 2019 fairly clean, with smaller 2018 capital gains being the small consolation prize. Nevertheless, I still have a few crap piles left that I'll continue reducing cost basis on because I don't need the losses here and/or want to hold on to them for potential use next year, as well as a couple things that have "magically" worked out in the short- to medium term that I don't want to take gains on. Along with this broad market sell-off, however, comes potential opportunities, and I've been pouring over sector exchange-traded fund charts to see where the comparatively huge weaknesses lie for potential bullish assumption plays to start off the new year. Here are a couple of preliminary ideas, the brass tacks of which I'll get into after we ring in the new year. OIH/XOP/XLE Pick your poison. With oil crashing from a high of nearly $77/barrel at the beginning of October to finish Friday at $45.42, OIH, XOP, and XLE have followed suit, with OIH hitting lows not seen since the turn of the century; XOP and XLE aren't far behind. The play: I generally favor upward call diagonals, since you can fiddle with front to back month duration, and therefore maximum per trade exposure as compared to WOF*-fing or SPACK**-ing which subjects you to full notional risk, meaning that you'll have to mentally aside the buying power for those in order to take on a full one lot of shares (13.65 for OIH, 25.35 for XOP, and 56.11 for XLE) if you're going the WOF/SPACK route. Going longer dated with the back month requires a wider diagonal spread for an ideal setup (break even at or below market price of underlying; debit paid <75% of the spread width), so you can tailor the setup to your account size and/or risk appetite for the play; personally, I don't like to go with anything shorter than split month, since I like to have plenty of opportunity to reduce cost basis, and a one-month doesn't give you that, in my opinion. You'll naturally want to compare and contrast whether going call diagonal versus naked short put gives you buying power relief on margin, particularly for something like OIH, which was trading at 13.65 as of Friday close. The buying power effect of a 13 short put, for example, should be about 20% of notional, or 2.60. In a cash secured environment, you'll generally always get relief, since the short put would invoke 13.65 in notional/buying power, and a 90/30 upward call diagonal regardless of which expiry you use for the back month is unlikely to involve something greater than a 13-wide.*** XRT Fourth quarter earnings are generally the best quarter for retail, given the amount of cash people lay out for the holiday season. XRT is at long-term range lows, so I like a bullish assumption play to take advantage of this seasonality, with the front month in fourth quarter earnings season (Jan or Feb) and the back month in the next (March or April), since earnings are likely to contract off of their holiday peaks. As with the OIH/XOP/XLE bullish assumption play, you'll want to compare and contrast a short put over the relief you'd get over doing a 90/30 diagonal, and evaluate whether the possibility of taking on full notional risk is something you want to do given your risk appetite and/or account size. * -- "WOF" -- "Wheel of Fortune" put sold at the nearest the money strike. Run to expiration, you keep the premium if it expires worthless. If assigned, you proceed to sell calls against. ** -- "SPACK" -- "Short Put/Acquire/Cover" put sold generally at the 20-30 delta. Run to expiration, you keep the preem on worthless expiry. As with the WOF trade, you proceed to sell calls against, at or above your cost basis. *** -- The OIH April 18th 30 delta short call strike is at the 16, so a 13-wide would be a back month at a 3 strike. The lowest strike available in any expiry is a 10. JNK Yes, junk. With a 5.88% yield as of Friday close (1.98/share annually; $198/one lot versus TLT's 2.85%), junk is attractive from a yield perspective and could be a decent place to park cash here while the equities markets gyrate themselves out. Nevertheless, well, it's "junk," and really the only way I want to be in it is if I can fully hedge it while sucking in the divvies. This is how the setup would work. First, price out the next monthly at-the-money/out-of-the money short call vertical. For example, the March 34/36 short call vertical is paying .33 at the mid with a delta metric of -27.16; sell it. Because it's -27 delta, you'll want to buy 27 shares of JNK, resulting in a delta neutral, fully hedged position. Naturally, you'll have to manage it as you would any other position, rolling the short call vertical down or out in time to keep the full setup (stock + short call vert) in delta balance, with the downside being that if price moves up into your short call vertical, you'll have to in all likelihood widen it out to receive a credit for it on roll. Of course, 27 shares of JNK is probably not going to rock your world with divvies, but you can scale up over time or at the gate.
AMEX:SPY
by NaughtyPines
THE WEEK AHEAD: XOP, OIH, USO, XLE, UNG, EEMEarnings With >70 Rank/>50 Implied: No underlyings with highly liquid options with earnings announcements in the next week. With single names with earnings announcements in the rear view mirror, we're looking at earnings starting up again in the January cycle; I'd rather just play those closer to the announcement, rather than get caught up in a volatility expansion (e.g., CAT (84/40) with earnings in 53 vs. January opex 47 days until expiration). Exchange-Traded Funds With >50 Rank/>35 Implied XOP (81/44) OIH (81/43) USO (81/57) XLE (75/27) UNG (75/88) Notes: As you can see by the pictured setup, XOP is at the bottom of its 52-week range. With OPEC talks right around the corner (and likely jawboning to ensue), I'm slightly enamored with a bullish assumption setup here as compared to a nondirectional premium selling play, even though there's premium to be had (the Jan 18th 29/37 short strangle's paying 1.09 with a 70% probability of profit). Last week, I entered into a similar setup in OIH, (See Post Below), since it's gotten the sledge hammer to a greater degree than the rest of the petro-sensitive exchange traded funds. In any event, here are the metrics for the pictured play: Max Loss on Setup/Buying Power Effect: 4.02 debit/contract; Max Profit on Setup: 1.98/contract; Break Even on Setup: 33.02 vs. for a 6-wide, BE at 33.02 vs. 32.81 spot; Debit Paid/Spread Width Ratio: 67%. Look to roll the short call aspect out on significant loss of value (usually 50% max) and to take profit at 50% max (.99/$99 per contract). UNG has been pesky. I've looked at getting into a bearish assumption, seasonality-related short setup, but every time I look, the markets are stupid-wide, making it unattractive from an entry/exit perspective. Given its high rank/implied, however, it might be amenable to a bearishly skewed oppositional setup if you're willing to do a bit of price discovery and not settle for sub-mid price nonsense: the Jan 18th 27/46 short strangle is paying 2.92 at the mid with a net delta metric of =25.44 and break evens at 24.08 and 48.92, which covers a fairly huge swath of the 52-week range. If you're willing to spend a little more time in the trade, the April 18th 26/46 pays 4.91 at the mid, is =29.44 delta, and has break evens of 21.09 and 50.91, although I could see the reluctance to hang yourself out there undefined given the movement it's experienced over the last several weeks. Broad Market Exchange-Traded Funds Ranked By 30-Day Implied EEM 26 QQQ 24 IWM 20 SPY 18 EFA 18 Notes: The EEM Jan 18th 41 short straddle is paying 2.69; the ~30 delta, 39/43 short strangle pays 1.15. I've been working it via double diagonal with a short straddle body, just so I don't have to leg into and out of the long strangle aspect and to budget buying power devoted to the trade. (See Post Below).
AMEX:XOP
by NaughtyPines
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