It’s the end of the year, and it’s time to really hone in on those trades that could perform for the start of 2024. We’ve had quite a run into the holidays, with many sectors making new highs as we close out 2023. So, what’s on deck for 2024?
Last week, I showed a chart of XLE as an illustration of the potential for some bullish oil names coming into the end of the year. Let’s review XLE now:
Above the 50-Day Moving Average, it appears the XLE story may just be getting started. With a reasonable RSI, a bullish MACD, and some bullish signals in simple moving averages, it appears that oil could continue to be in focus to start the new year.
In order to confirm if this is still a sector where I want to concentrate on finding interesting setups and individual names for my Outlier Watch List, I certainly need to start with USO, an oil price ETF:
Looking at USO, we’re seeing prices close above the 200-Day Moving Average once again. This could be the sign of a very bullish oil market. And a bullish oil market often pairs well with bullish oil equities.
So, with this in mind, I’ll stay focused on XLE, OIH, and many individual names. One particular name that appears to be of interest is Chevron, stock symbol CVX:
As you can see, CVX has started to rise after making a significant pullback just 2 months ago. That nearly 2 month long period of consolidation gives a strong base of support, and along with the bullish move in oil, I am intrigued by the potential upside here. A return to prior highs would give upside of nearly $20 per share with the downside of about $10, and that gets me excited about potential leveraged trades utilizing options.
As I’ve said before, 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. I’m always looking for opportunities like this for my Outlier Watch List that I can leverage and define my risk by using options.
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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