XOP for Oil breakout after use of SPR suspended
Updated
The context for this entry is based on the suspended use of our Strategic Petroleum Reserve by the US Government. In April of 2022, our leadership chose to tap the SPR in an attempt to hold off inflation at the pump. While this worked for much of 2022, and early 2023, the SPR can no longer be used or it may compromise our national security (e.g. cut off from external supplies of oil to create fuels in the development of electric and sustainable energy sources).
Since the price of OIL should started to breakout to the upside, we do need to watch inflationary control measures. If they start to dampen inflation, then OIL could remain at the current level for some time. Conversely, if as the Federal Reserve Expects, when inflation only tempers but does not drop into Q3CY23, we should see an increase in the value of OIL.
That's the subjective analysis. The objective analysis based on a decreasing wedge formation on XOP starting April of 2022. XOP continues to bump against a lower low of $110, and most support comes at around $116. Currently it's at $121/123.
The idea is enter put credit spreads 116/117, unless XOP hits $117, then strongly consider 90 day+ call swings. If XOP is at $117, then buy $117 calls for September or October, something 90 days out. The idea between these is that the put spreads limit losses if we retrace to 116, while the call swing is purchased at confirmation of the lower low. Do watch for a breakdown to $110 daily candle wick as seen in other prior days.
Since the price of OIL should started to breakout to the upside, we do need to watch inflationary control measures. If they start to dampen inflation, then OIL could remain at the current level for some time. Conversely, if as the Federal Reserve Expects, when inflation only tempers but does not drop into Q3CY23, we should see an increase in the value of OIL.
That's the subjective analysis. The objective analysis based on a decreasing wedge formation on XOP starting April of 2022. XOP continues to bump against a lower low of $110, and most support comes at around $116. Currently it's at $121/123.
The idea is enter put credit spreads 116/117, unless XOP hits $117, then strongly consider 90 day+ call swings. If XOP is at $117, then buy $117 calls for September or October, something 90 days out. The idea between these is that the put spreads limit losses if we retrace to 116, while the call swing is purchased at confirmation of the lower low. Do watch for a breakdown to $110 daily candle wick as seen in other prior days.
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XOP is making higher highs, with small pull backs to higher lows. March and May show a double bottom, and it's risen since then. Inflation fears are muted with lower CORE CPI on 7/12/23. A pull back would bring it down to $125, if it breaks lower or macro news comes out, then we can watch for return to the last higher low before CHOCH which is $120, also show a bull order block at the $120/122 range.Update Summary
$134, bear call spreads +5 to the strike, or just above the prior highs in March and Jan 2023. No need to exit bull put spreads, hold them to expiration provided no assignment or dividend risk exist.
$125, bull put spreads, -5 to the strike, or just above the prior higher lows and bull block. Also exit your bear call spreads here as the XOP should bounce back over $134 to make a run for $145.
Thanks for your patience.
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XOP continues to rise, with small retracements during the day. I do not recommend bear spreads on this index. Recommend on the pull backs enter put spreads at those pull back values -$5 on the mark as your entry strike price.I'm also looking at LONG CALLS for 9/15 expiration at $160, limit priced at $0.60 while the mark as of publishing is $0.80, current $140 call is $6.70, so $160 will be around 10x return when XOP reaches 160 ahead of 9/15.
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XOP is getting frisky with some breakout, I'm calling $160 by 9/8/23, put spreads ITM would are an option with little to no risk, example 169/170 at $0.99. 100 contracts cost $100 in reserves, when XOP moves up aggressively, the spread will go profitable and you can exit at your leisure/riskTrade active
CONTINUE TO BE IN XOP, based on SPR oil buy back (like a stock buy back)I've started to release my 9/15 positions and roll to 10/20 expiration. The 10/20 expiration is showing more bullishness than the 9/15, so hedging risk by grabbing some extra days and taking profits on the original entry time frame with XOP. Hope this helps if you're in XOP/Oil.
Trade closed: stop reached
XOP appears to be about as high as it will go for now, nearing mid 150's. With more inflation oil will go up and XOP will move in sympathy, otherwise it will chop for the next 12-18 months. consider USOI which is a covered call oil commodity ETN, do research an ETN and financial risks before investing in USOI ETN. Good luck!
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