Posted on July 28, 2019
We’re going to close down two open initiatives today – before we present you with a doozy third for the week.
Here we go…!
The first was mailed out on June 24th in a letter called The Chart That Gave Jordy an Aneurysm.
There, we urged you to buy DIA shares, then trading at $267.64, while selling ERIE shares for $252.71, in equal numbers. Total debit per board lot traded was $1493.
The idea was to capitalize on a stretched insurance sector – and it worked beautifully!
Today, shares of DIA trade at $271.86, while ERIE stock is down to $235.44.
Sell off the former and buy back the latter, and you pocket $3642 for every board lot traded. Less your initial investment of $1493, leaves you a clean profit of $2149. That’s a 144% gain in five weeks.
Good going if you went in big.
Our next trade went the opposite way. Please put away your kidney-stone softener kit and pay close attention.
It was opened July 15th in a letter called All aboard: From Penn Stn. to THE BOTTOM OF THE OCEAN!
And we’re closing it because we don’t like the way the chart is developing.
Take a look –
The trade was predicated on a break lower from the descending triangle – and it may yet happen. This sort of action does occur on occasion: a false break higher before a turn for the worse.
But we’re not waiting around for it. If you like your descending triangle – you can keep your descending triangle.
But we’re closing.
You’ll recall that we recommended you buy the PENN January 17th 16 PUT for $1.10 and sell the PENN January 17th 21 CALL for $1.00, for a total debit of $0.10.
Today, the 16 PUT goes for $0.75 and the 21 CALL for $1.60. Sell off the former and buy back the latter and you end up with a net loss of $0.95.
It’s rare that we offer a bad call. But when we do – we do our darndest to shut it down quickly. That was the case today. We’ll be happy for this small loss if PENN continues higher.
On a more hopeful note, we’re stepping somewhat out of our purview this week and offering you a commodities trade. Not to worry, though; we’re in good with our partner Matt McAbby over at A Jew and His Gold, so everything checks out – no toes stepped on and no hard feelings.
The trade is oil based – more specifically the oil exploration sector, where the falling price of crude has literally rent the sector in tatters.
Have a look at the chart –
This is a year’s worth of the SPDR S&P Oil & Gas Exploration & Production ETF (NYSE:XOP), a stock with a clearly bearish profile, but that we believe is now caught in a range.
Price sits today at longer term support at $24 (in blue), while resistance arrives at $28 (in red).
The price of oil itself has nosedived, recovered and is now consolidating. And because the explorers overshot on the downside preemptively, we say that gives us an opportunity.
And we’re playing it with an iron butterfly, set slightly above the current price, as we’re expecting a bounce.
It goes like this –
A Jew and His Money recommends you consider selling the XOP August 9th 25 PUT for $1.01 and the XOP August 9th 25 CALL for $0.23. With your $1.24 credit, buy the XOP August 9th 23.50 PUT for $0.26 and the XOP August 9th 26.50 CALL for $0.04. Total credit on the trade is $0.94.
With kind regards,
Hugh L. O’Haynew