Give Your Portfolio Energy

Portfolio

The economy is still in too good of shape and that once again has investors spooked.  Treasury yields jumped and rattled the market to start the month.  Manufacturing growth came out as being stronger than expected last month and that also has investors worried that the Fed will need to continue to raise interest rates aggressively to slow the economy in hopes of slowing inflation and preventing a recession, or even stagflation.

The number of job openings is dropping, but still above 11 million when the number of people looking for employment is nowhere near that level.  This has investors fearing that the Fed will double the usual rate hike at upcoming meetings in June and July.  There was some speculation that the Fed would pause the rate hikes at the September meeting, but with the latest round of positive economic news, hopes were quickly diminished.  

Energy prices continue to climb and now the airlines and cruise lines are coming out saying fuel costs will be higher than the prior forecast and will eat away at potential earnings.  The companies don’t know how much they can push off onto consumers without scaring them away from the upcoming travel season.  Hmm, didn’t I just write about staycations yesterday?

Despite a strong rally last week, the 6% move on the SP500 ETF (SPY) was done on decreasing volume.  It was a shortened trading week, but increasing prices on decreasing volume usually supports the bears.  If we were going to break any major trends, it would be nice to see increased volume as more people take part in the rally.

 

portfolio

We are now stuck, bumping up against a previous support line that was in place for months. That support line has now become resistance and it looks like we’ll be pulling back from the line before attempting to break it again.  Not only did we hit a previous support line, but we also hit the top of a downward trend line.

Portfolio

That brings us back to our relative performance charts for the various sectors.  Energy and Utilities are still performing the best over the longer time frames.  We will take a deeper look at Energy after the OPEC meeting today.  

Today I’m looking at Marathon Petroleum Corporation (MPC).

I know some of you would say that stock has to come down because it hit its upper trend line, but in fact, I enjoy trading stocks that keep making 52-week highs.  I don’t shy away from it.  Sure, each of the last couple of peaks it retraced for a couple of days, but then it returned to its upward trajectory.  Depending on what OPEC has for us, I think Energy is a bit overextended and could pull back for a couple of days, but I’d look for a buying opportunity to get into MPC.

For the option traders out there, The 15 JUL $95 / $90 put spread is going for $0.86.   That gives you a breakeven price of $94.14 and I target 50% profit on spreads.  Using delta as a proxy for probability, you have a 76% chance of MPC finishing above $95 by July 15th.  I know taking profits at 50% (or $43) doesn’t sound like much, but that’s a 10% return on required capital and with time decay and any upward movement, you shouldn’t need to be in the trade until July.  

You can also be more aggressive with your strike price selection, but $95 is right around that bottom channel.  Should the energy stocks take a brief dip over the next day or two, you should be able to place the same trade for more premium.

Stay tuned because I’m working on some semiconductor plays and I’ll share some research over the next couple of days.  I hope you enjoy it.

If you have any questions, comments, or anything we can help with, reach us at any time.

 

Jeff

Guest Writer, Filthy Rich, Dirt Poor

Editor, Wealthy Investor Society

Is The Stock Market Cycle Pointing To A New Bull Market Already?

Is The Stock Market Cycle Pointing To A New Bull Market Already?

memberswis
On February 6, 2023

February 7th, 2023Is The Stock Market Cycle Pointing To A New Bull Market Already?Are we in another bear market rally or the start of something new? That’s what everyone wants to know, especially as we

Job Creation Shocks The Market

Job Creation Shocks The Market

jeffwood
On February 5, 2023

February 6th, 2023Job Creation Shocks The MarketIf we’re heading into a recession, how were we met with better-than-expected job growth numbers last week? Unemployment dropped, despite the headlines of tech companies planning to lay off

Job Cuts And Stock Buybacks Keys To Success In 2023

Job Cuts And Stock Buybacks Keys To Success In 2023

memberswis
On February 2, 2023

February 3rd, 2023Job Cuts And Stock Buybacks Keys To Success In 2023 The thing I’ve learned from this earnings season is that a company can have consecutive quarterly drops in revenue and provide a lower

Fed Raises Rates But Bulls Are Still In Control

Fed Raises Rates But Bulls Are Still In Control

memberswis
On February 1, 2023

February 2nd, 2023Fed Raises Rates But Bulls Are Still In ControlOk, bulls. You win.  I will start lifting my bearish stance on the market.  Despite the final 10-minute market sell-off and a Dow that finished

What Past Fed Announcements Tell Us The Market Will Do Today

What Past Fed Announcements Tell Us The Market Will Do Today

jeffwood
On January 31, 2023

February 1st, 2023What Past Fed Announcements Tell Us The Market Will Do TodayWatch out - this article is going to have some math.Here we are once again on Fed Announcement day. Most of the folks

The Hidden Profits Of 2023

The Hidden Profits Of 2023

jeffwood
On January 30, 2023

January 31st, 2022The Hidden Profits Of 2023There is still one more trading day left in January, but if the adage “as the S&P 500 goes in January, so goes the year” holds true, the markets

The Fed Goes Up Against Earnings This Week

The Fed Goes Up Against Earnings This Week

jeffwood
On January 29, 2023

January 30th, 2022 The Fed Goes Up Against Earnings This Week We are in peak earnings season with some heavy hitters like Pfizer (PFE), Snap (SNAP), Meta Platforms (META), Amazon (AMZN), Alphabet (GOOGL), and Apple

Smoother Sailing in 2023

Smoother Sailing in 2023

user
On January 18, 2023

January 17th, 2022Smoother Sailing in 2023 Nothing has changed since the end of 2022, yet traders have already decided that this year won’t be as bad as the last. Bulls have been piling into stocks

The Rise Of Bing Over Google – That’s No Joke

The Rise Of Bing Over Google – That’s No Joke

jeffwood
On January 12, 2023

January 12, 2023 The Rise Of Bing Over Google - That’s No Joke Before we talk about two tech giants getting ready to battle it out once again, let’s look at the overall market. The

Why I Ignore Most Of The News

Why I Ignore Most Of The News

jeffwood
On January 8, 2023

January 9th, 2022 Why I Ignore Most Of The News It’s easy to get caught up in the financial headlines. I’ve certainly done it. Last week shows why I ignore most day-to-day stories. I know

PREV NEXT
Receive the latest news

Subscribe To Our Daily Newsletter

Get notified about new articles, special events, training, and much more

Like What You See?

Leave your info below to get more options and trading ideas to your inbox

Yes, send me news to my inbox.