As we approach the final week of the year, it’s time to dig deep an look for that last trading opportunity for this year, or perhaps the first trading opportunity for next. Timing is never 100% certain, but keeping an eye on the markets in times where the market can sometimes seem irrational or illiquid can also mean times with the best trading opportunities.
Last week, I brought up a potentially exciting opportunity in JWN off the back of strong retail stock performance and a takeover offer for Macy’s. So, let’s look at the chart:
And for now, it looks like JWN is continuing to continue its price action to the upside. This is a great sign for a potential trending stock, and it does continue to keep me excited for retail stocks going into the end of the year.
But I am always looking for new opportunities and better opportunities, and one seems to be starting to show signs of strength here after a rough couple of months. Let’s look at oil:
As you can see, oil seems to have found a bottom last week amid some bullish FOMC and bullish oil demand reports. With that, USO is now pressing against the 200-Day Moving Average and seems prime to push through. For me, that means I need to start looking at oil stocks for my weekly watch list, and the first ETF I look at for that deeper dive Is XLE:
Here, it’s clear that XLE is tracking along with oil, but on top of that, XLE is now looking ready to take out the highs of the rectangle formed in November. If/when that occurs, we could be looking at an explosive move higher. So, with that in mind, I’ll be monitoring many of the names from XLE in my Outlier Watch List in the coming days or weeks. If we get just a little bit more momentum in oil and oil companies, we could start to see some explosive returns if I can pair that trade with an options position that also defines my risk.
The key when markets are slowly griding higher is to always be vigilant – it’s never certain whether the next move for the market, a sector, or an individual stock is going to be higher or lower, but if I can find a setup with a high probability technical entry and a highly leveraged options trade, I can find some really great trades every year, month, week, and day of the trading year.
As always, go to http://optionhotline.com to review how I traditionally apply technical signals, volatility analysis, and probability analysis to my options trades. And please, if you have any questions, never hesitate to reach out.
Happy holidays!
Keith Harwood
Keith@optionhotline.com
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