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Quick Takes Pro Market Technician Michael Kahn Analyzes the S&P 500:
SPX was trading at 2,097.30 at the time of analysis, down 2.83 on the day. Last week we were watching a potential bullish-flag breakout which appears to have since been successful. But, the large band of overhead resistance is still present and has yet to be retested. At this point Michael’s not convinced that SPX is moving towards new highs, but expects that if SPX continues to move up, the upper range of the resistance band will be as far as it can go. We’re also seeing a small pullback from that bullish-flag breakout which could be an indicator that the bull run is done. Unfortunately there’s not a clear pattern present to give us an indication of what’s to come at this point.
Michael Kahn’s Chart of the Day: Occidental Petroleum Corporation (OXY):
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Occidental Petroleum Corporation was trading around the $76.24 level during the time of analysis, above its 50-day moving average of $75.09. At the end of last year, OXY saw a break to the upside following a downtrend that had been present since last summer. That rising trend is still intact with a resistance level being present just under $78. Michael also points to a triangle pattern that’s emerged over the last month which he believes may be a pause before a breakout attempt. That triangle pattern is similar to a cup with a handle pattern, which happens when a stock declines, attempts to rally, stalls at resistance, then jumps around for a bit without actually falling again. If a breakout occurs now, it may be a buy signal. The 50-day moving average is also above the 200-day average, which generally is viewed as a bullish condition. It’s not currently beating the SPX, but Michael isn’t overly concerned about that. Overall, he believes this stock has the potential for a bullish run if it successfully breaks out.
TradeKing “Options Guy” Brian Overby Analyzes Occidental Petroleum Corporation’s Volatility & Dividends:
Occidental Petroleum Corporation’s 30-day Implied Volatility (IV) has slowed down quite a bit since the beginning of the year as oil has become more attractive leaving OXY’s IV at a 6-month low.
Occidental Petroleum Corporation pays quarterly dividends yielding about 3.95% annually and its next earnings announcement is anticipated to be on 08/04/16.
Brian Overby Shares OXY Paper-Trading Strategies:
Brian’s first paper trade was a Short Put Spread, a neutral to bullish strategy that’s looking to take advantage of the potential pop to come. His second paper trade was a Leveraged Covered Call that is a bit more short-term than the traditional Fig Leaf strategy that typically incorporates a LEAP.
Brian’s First Paper Trade - Short Put Spread
- Buy 1 Jul 15th 2016 OXY 70.00 Put
- Sell 1 Jul 15th 2016 OXY 72.50 Put
- 45 days to expiration
- Net Bid 0.50, Mid 0.56, Ask 0.62 for the strategy
- Net credit is 0.56 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: 1.94
- Maximum potential gain: 0.56
- Total commission to enter this trade at TradeKing is $6.25
Brian’s Second Paper Trade - Leveraged Covered Call
- Buy 1 Jul 15th 2016 OXY 70 Call
- Sell 1 Jun 17th 2016 OXY 78 Call
-17 and 45 days to expiration
- Net Bid 5.47, Mid 5.76, Ask 6.05 for the strategy
- Net debit is 5.76 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: 5.76
- Maximum potential gain is limited to the premium received for the back-month (Jul 15th) call minus the cost to buy back the front-month (Jun 17th) call, minus the net debit paid to establish the position. It is not defined because the price of the back-month (Jul 15th) call will be dependent on market conditions at the expiration of the front month option.
- Total commission to enter this trade at TradeKing is $6.25
Important notes: Option prices are given as a per-contract amount. Multiply loss and gain figures by 100 shares and by the number of contracts traded to determine the amount of the full potential loss or full potential gain. No additional calculations are needed to determine commission costs.
TradeKing Options Tools used:
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