Last week’s SLB call didn’t work out the way I wanted, and I’m not going to pretend otherwise. The stock chopped instead of trending, and the position didn’t get the follow-through I was looking for. But one loser doesn’t change my read on the setup; it just tells me I need to be more selective about which name in the group actually has the wind at its back.
And energy is still where I want to be. With oil prices elevated and the Fed set to hand down its rate decision tomorrow, energy was one of the only sectors in the green yesterday while the rest of the market got hit. That tells me there’s real money rotating into the group, not just a headline-driven pop. The problem is that OIH, the oil services sector ETF, isn’t giving me a clean trending pattern to work with right now, and a handful of the names I’d normally lean on aren’t cooperating either. That’s exactly the situation where I lean on the Stock Forecast Toolbox. Try it out for free!
Rather than force a trade into any name just because it’s “in the sector,” I let the Toolbox tell me which individual producers are actually positioned to move. This week, that name is BP:
BP has been building a healthier base than SLB and the rest of the group, and when I ran it through the Toolbox, the model backed up what I was seeing on the chart:
With oil prices staying firm into the Fed meeting, the projection here supports a continued push higher, and that’s enough for me to structure another defined-risk options trade in the sector, this time with a name I have more conviction in.
The October 16th $47/$50 call debit spread is currently valued at about $1.09, with a maximum value of $3.00. That’s a max return of over 170% if BP closes above $50 at expiration, though I’m not counting on squeezing out the full max value. As we have seen, energy names can chop even when the sector tailwind is real, so I want to see this spread work its way toward $2 or better and take the win rather than get greedy holding into expiration.
As a reminder, the Forecast Toolbox doesn’t just give me one prediction every week or every day. It models out high probability moves for most listed stocks in the market. I can check every stock in my portfolio to make sure I’m positioned right when I’m holding my investments, and when I’m looking for a new trade, it provides a filtered list of some of the most explosive setups so I can find the next great idea for my trading portfolio.
Make sure to take advantage of the free 7-Day Trial of the Stock Forecast Toolbox so you can see what it can do for you!
If you have any questions, never hesitate to reach out.
Keith Harwood
Keith@OptionHotline.com
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