“Buy Zone” Alert for PBF Energy

Dear Reader,

Yesterday, we looked at a Daily Price Chart of Valero Energy Corp., noting the stock’s 24/52 Day MACD line is above the 18-Day EMA signaling a bullish stock.

For today’s Trade of the Day we will be looking at a Keltner Channel chart for PBF Energy Inc. stock symbol: PBF.

Before breaking down PBF’s daily Keltner Channel chart let’s first review which products and services are offered by the company.

PBF Energy Inc., together with its subsidiaries, engages in refining and supplying petroleum products. The company operates in two segments, Refining and Logistics. It produces gasoline, ultra-low-sulfur diesel, heating oil, diesel fuel, jet fuel, lubricants, petrochemicals, and asphalt, as well as unbranded transportation fuels, petrochemical feedstocks, blending components, and other petroleum products from crude oil.

Now, let’s begin to break down the Keltner Channel chart for PBF. Below is a Daily Price Chart and the three Keltner Channels for PBF stock.

Buy PBF Stock

The Hughes Optioneering Team uses the Keltner Channels as an indicator to determine whether a stock is overbought or oversold. If a stock’s daily stock price is trading above the upper Keltner Channel, this signals that the stock is temporarily overbought and subject to a retracement.

Even stocks that are in the strongest bull trends do not advance in a straight line. There are always price retracements along the way. When a stock becomes overbought, it’s price will typically decline soon after as the inevitable profit taking occurs.

The PBF daily price chart shows that the stock is in a strong price uptrend and has become overbought several times. You can see this as PBF has traded above the Upper Keltner Channel on multiple occasions recently.

But, in every scenario when PBF became overbought, the stock soon experienced a pullback.

Finding opportunities when a stock experiences a pullback is why the Hughes Optioneering Team uses the Keltner Channels. They help us find a lower-risk entry point.

The Keltner Channel “Buy Zone” occurs when a stock is trading below the upper Keltner Channel. Once the daily price is trading below the upper channel, it provides a lower-risk buying opportunity as the stock is likely to rally.

Our initial price target for PBF stock is 58.50 per share.

Profit if PBF is Up, Down or Flat

Now, since PBF is currently trading in the Keltner Channel ‘Buy Zone’, this offers a prime trade opportunity. Let’s use the Hughes Optioneering calculator to look at the potential returns for a PBF call option spread.

The Call Option Spread Calculator will calculate the profit/loss potential for a call option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 10.0% increase to a 10.0% decrease in PBF stock at option expiration.

The goal of this example is to demonstrate the ‘built in’ profit potential for option spreads and the ability of spreads to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike prices used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for PBF on 9/21/2023 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $325 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if PBF stock is flat or up at all at expiration the spread will realize a 53.8% return (circled).

And if PBF stock decreases 10.0% at option expiration, the option spread would make a 40.4% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 53.8% profit potential when the trade was identified*.

Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.

A higher percentage of winning trades can give you the discipline needed to become a successful trader.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

Trade High Priced Stocks for $350 With Less Risk

One of the big advantages to trading option spreads is that spreads allow you to trade high price stocks like Amazon, Google, or Netflix for as little as $350. With an option spread you can control 100 shares of Netflix for $350. If you were to purchase 100 shares of Netflix at current prices it would cost about $38,000. With the stock purchase you are risking $38,000 but with a Netflix option spread that costs $350 your maximum risk is $350 so your dollar risk is lower with option spreads compared to stock purchases.

Wishing You the Best in Investing Success,