I want to talk about a trade we exited this past week with my Burn Notice Alert members...
The overnight trade we just pulled off in Chevron Corp. (NYSE: CVX) was a textbook Burn Notice play where we fade the market! CVX is one of the most overbought stocks in the entire S&P 500 — by a long shot — and the conditions for an overnight reversal were strong on Tuesday.
The stock was up a market-leading eight days in a row — the day Burn Notice alert went out — with a FOMO capitulation to own the stock. While the rest of the market was selling off hard, the panic sent large volume into Chevron, sending the stock 7% higher by the time I looked at my scanner.
Oil is of course central to the news right now, and headlines are moving crude double-digits either way in an instant. But we’re looking for stretched moves to fade, and I was already seeing signs of oil stock fatigue as the sector was mixed with losers as well.
However, the FOMO move and resulting massive volume was one of the biggest indicators this was the perfect stock to fade — if those traders have the smallest thing go against them, they’ll panic and sell the next morning.
And once Wednesday morning came along and I saw what the markets were doing, I knew I was right and we had to act fast.
Oil was down as the risk-on trade was back... CVX looked like it was also tumbling down, which triggered Steve Miller singing “Take the Money and Run” in my head. Things change super fast on Wall Street at any moment, so we booked that money and traded out of the stock as fast as possible after the opening bell...
And guys, the return of this bad boy was shocking…
Thanks to things like higher energy prices, supply chain issues and rising global demand, prices at our local grocery stores have skyrocketed…
But that’s not even the worst part about it!
Things are about to get progressively worse over the next year because of inflationary pressure in the U.S. and the ongoing Russia-Ukraine war… I mean, both of these issues are putting even more stress on the global food supply chain than there already is.
When you take into consideration that Russia and Ukraine account for nearly 30% of the world’s wheat exports combined, along with the price increases we’ve already seen in some commodities and the fact that inflation isn’t going anywhere anytime soon…
There’s a great chance for even more upside in a particular group of agricultural stocks…
“Hi Roger, I liked the video on earnings release and expected price move.”
Ron K.
System Traders are rules-based traders who use some level of automation to employ an objective set of rules, allowing a computer to both scan for trading opportunities and handle the order entry activity.
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