Crude Oil… Shake and Bake. Third time’s the charm.

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It isn’t often that I don’t see the “Sunday Futures Open”, but I was busy yesterday, and had dinner, and I couldn’t check them until a few hours in. But I checked them at dinner, of course, on the phone. — That being said, once I checked them, I was pretty aggressive to take advantage of thin overnight trade (that I didn’t or couldn’t agree with).

First off, I was pleased to see the USD sell off over the weekend — I know we “will” raise rates, but from last weeks price action and headlines — It didn’t seem like we would be making any move at all come September. *As of today’s settlement, we are now in September, the august month end portfolio “adjustments” have taken place, and it is a fresh start. – I was able to make a few good trades betting on some risk currencies, and still have a lot of opportunity to trade the EUR/USD, I think this is a must trade again as the consistent up and down opportunity is there.

This morning I was incredibly swamped, I legitimately did not get to “trade” or look at an actual computer until 1pm. I was doing a lot of “phone” monitoring and (trading if needed). Sometimes it pays to be busy — I mean if you have been reading my blogs, you know I have been bullish on commodities, but specifically in my Crude Oil position… This has ultimately rallied almost 30% since Wednesday night of last week. As always, I was focused on the future, as in “where we are going next”, and this trade is working out, much more than anticipated. Granted, we had come off extremely aggressively from our 100+ a barrel highs, but clearly I’m not the only one who sees the bigger picture now. As I noted before this “rally” stemmed from the huge bid in distillates (RBOB HO), the products have had incredible strength and follow through.

Last night Crude Oil was down well over $1 all night, “as many as you wanted”, this was the perfect opportunity for me to not only cover the calls I sold at eod Friday, but cover some puts as well… Then I went to sleep. Everyone else was puking/selling, I saw it as the “shake and bake” set up to hopefully our third BIG rally/squeeze. This morning, CL was a bit lower still, it had traded above 45, but came back down around U.S. market open… Then like Thursday, like Friday, *The trend is your friend — and we are up almost another $4 today alone! Luckily, I was busy for almost the entire session, I wasn’t able to “ruin or mess this trade up”, I constantly adjust the risk in this position, but again during the US NYMEX session, Crude did all the work. — Since I have positioned for the “future”, I didn’t need to play Monday Morning QB, — The best thing about the entire CL position, is I have paid ALOT on hedges and kept risk tight with rolling up puts and as I said earlier selling calls at time against long futures, as well as rolling between months and outrights/options.

The only way to be a profitable trader — is to trade — I have to take risk, or I can’t make (or lose) any money. I am focused more now than ever, on making money, if I stay active and TRADE, this is very possible, and then sometimes, you get a little lucky, and even without trading, you make more $. — “Sometimes the best trade, is no trade at all”.

I’m sick of talking about Crude Oil to be honest, (as I am sure most people are, since they were all short clearly ha)… I love the trade, and I think there is a lot more to do around it, but I am still cautiously optimistic. (And as I have this cautious optimism, I can’t remember the last time we rallied like this, let alone 3 days in a row.

I was distracted with ES EOM options expiration today (once I could trade), and I still think Gold GC is the next “market” to make a significant move (or maybe I am positioned for that).

That being said, it may sound like I know something, but, I know nothing. — And: Knowing that I know nothing has given me back the ability to trade. For now.

Let’s try again next week. Have a GREAT weekend! – Happy Trading.

-Bret Rosenthal

Crude leads again, and I get pinned on the ES… What a week!

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Well– I can’t say enough about the unbelievable performance and “justice” in the price of Crude Oil these past few days… I honestly can’t understand how we really fell this low in price (again), but at least during these last two sessions; the oil bulls have come out to rally. Front month Crude Oil (CL) again (2nd day in a row) was the largest gainer of any futures market tradable on earth. Thus if you are a bull, and you are trading these markets, the last two sessions, there wasn’t a better product than looking within the energy space — and looking directly at CL was the only choice at this point, or at least for me.

OCT 15 Crude Oil opened @ 42.68, traded as low as 41.78, as high as 45.90, ultimately to settle at 45.22 +2.66 a barrel today! The NOV-Dec-Jan were all “just as bid” as clearly players wanted to get long Crude Oil as we had one of the largest short squeezes back to back in Crude Oil in a very very long time (Well over 12% gains for the week). This momentum and strength could be seen spilling over from the perma-bid in the distillates (RBOB HO) the products have had a “real bid” as Q3 is coming to an end. All of a sudden – the bears have gotten very quiet (literally where have they been?), but now we start to have bulls coming out again, and I remember this earlier in the year when we fell to low 40s in March, only to be trading above 60 by April. **All the bulls came out once or as we started getting back towards the 2015 highs… I am cautiously optimistic going forward, as I clearly think we could/should trade higher than where we are and have been, I respect markets and risk, thus I can’t sit naked and pray… I will stay long (if I want), but I will do so through calls or with protection in puts or selling calls against long futures (basically synthetic long calls) at that point. *Basically as long as “you know your risk”, I think there is no better place to be taking attempts at scalping and speculating than the futures market. Again, I don’t give investment advice, all I can do is share with you my journal/notes regarding some of my trades or what’s on my mind market wise.

The last part of the post I want to touch on expiration, I like to play weeklies, I like to play end of months, different expirations don’t scare me, but it is important to know all the rules or steps one would take in any scenario, (as you trade into or though an expiration). As I was feeling rather euphoric/confident regarding my recent Crude trade, and the general direction of my recent “risk”… I figured I should take some shots at getting long the stocks again, as I had puked the ES last Friday and been focused elsewhere— I thought maybe this Friday we rally to close. *Well by the end of the day, I had gotten my rally, I mean literally into the final minutes of trade, the ES went from below 1972 at 14:42, to above 1990 by 15:13! This really is not that big of a move (for this week), but I was certainly not expecting to see my last shot ES options play turn into anything but zero with minutes left. But I lost on the trade overall, I cut my chances of losses, and attention to detail helped me scrap nickles and dimes as more of my weeklies became ITM… But- overall, the problem was not only that these options were expiring at 3pm today, but I did not have quite the backup plan or vision for this brief smug ES trade, nor the set-up, patience, etc. I mean sure stocks could rally into close (and they did!), but we had already came up huge off of Monday’s debacle and so on… this was a bit aggresive. Ultimately I got pinned on some of my calls to (the 1985s), which ended up working out (as in not going to zero) since we had that pop — but you should have seen me panicking when I realized we were .25 or .50 ITM on 1985 and I wanted to know if I was long ES or not, as we popped to 1990 and I got “lucky” learning a lesson and not losing to much $. Overall – the last part of the post is to point out – “Sometimes the best trade, is no trade at all”. Basically don’t overtrade, it’s lucky enough to catch good moves this week and “live to trade another day”.

A Epic, record, volatile week for the books. I can barely remember the beginning of the week to be honest, what a long couple days, I can’t imagine any trader (win or lose) who isn’t finally relieved and relaxing this weekend… That is… Until Sunday at the Futures open again!

Let’s try again next week. Have a GREAT weekend! – Happy Trading.

-Bret Rosenthal

Crude Oil $CL_F — “Numbers don’t lie, People do”

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I know… it may only be a one day event. So that being said— why not talk about it for a moment, since the futures are still not even closed, and hit a new high since 1:30 settlement.

Yesterday I posted dumbfounded regarding “Why isn’t CL rallying?” –

Well—- I guess the answer is, because “although maybe it should have, it seemed best to squeeze out the last weak shoestring longs in the market maker eyes rather than just give all the retail day traders the low hanging fruit! *Well— if you were patient enough, managed your risk, weathered the storm, maybe even got lucky, YOU may have caught the BEST DAY IN OIL SINCE MARCH 2009.

Front month Crude Oil settled @ $42.56 a barrel +$3.96 or +10.3%! There was not a better performing market to be in when it comes to any future product today. —So that being said, Crude Oil just had its best day in the last 3 years. And, anyone who has been following markets or specifically trading Energy this past year and a half can tell you; This has been the worst streak for Oil in over 30 years, last year alone was a record breaking move!

As I mentioned twice as I wrapped up yesterdays Blog post “WHY WOULDN’T CRUDE OIL CL BE ABLE TO EVEN END IN THE GREEN, LET ALONE UNCH?”. – I guess the answer was, it was setting up for today.

After the crude oil stocks unexpectedly fell by more than 5 million barrels last week, data showing inventories in Cushing, OK, declining.. And specifically the API and EIA we had yesterday (which we shake and baked off of capitulation lows)… All of a sudden it seems like the “numbers don’t lie, people do” saying is kicking into traders minds when it comes to “how they are going to TRADE Crude Oil going forward.” People kept talking about supply, but I think this for a moment, at least, in the last 24 hours, the bearish sentiment is certainly being tested by the historically strong and aggressive oil bulls moving prices in a record fashion. It helps that: *(the thought of diminished crude supplies mixed with stocks bid back up, copper recovering, I saw coal stocks up stupid amounts, even the aud/cad/nzd were higher today with a stronger USD).

Just as many retail traders came out yesterday and decided to play their hand at “short market maker” or I mean sell a stock or market short, the stocks ripped their faces off in a record way. I was wondering WHY Crude Oil CL wasn’t participating yesterday as the Dow rallied 600pts, —but we find out today, that it was setting up to set its own record! The traders as of late are used to a Crude Oil, where every rally, even .38 bounces higher are slammed lower, but today, the bulls brought a record short-covering surge against the bearish traders.

I will close with the same exact closing I did yesterday, hey why not, it worked, but although I think long term we could bid higher, I know nothing, and I will be active and trade it accordingly. I do not give investment advice, I can just say my opinions and give you an idea how I am looking at things. Right now let’s say I am or were to be long, I would bet I own some puts for protection and BP/Margin effects, since we are moving 10% swings in a day… but at least it’s higher if you are bullish :) — and it’s not over, (they are futures), better now than over a sketch thanksgiving holiday break…

So, now where does CL go tomorrow? What will make it move? Take a look at the futures at 5pm and let’s figure it out.

Let’s try again tomorrow. – Happy Trading.

-Bret Rosenthal

What will move Crude Oil… (*Not the Dow) – Draw on CL Supply?

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Well… Most people are talking about how the Dow Jones could rally up 600 pts, and I can’t stop staring at the Spoos ES moving 10 handles every couple minutes. I sat here feeling confident that we could easily bounce and finally rally higher, as we did all night again, and finally — this time WAS different. We didn’t tank into the end of the day I mean (we ripped up huge, finally squeezing the shorts), *now the real question is, but what happens tomorrow. —- I will constantly use rhetoric to stress that futures are a market focused on what will happen next, not what happened in the past. So with that being said, if you were long the ES today, you made great profits on a 1 lot, if you weren’t, hopefully you weren’t very short. But, that is the past, the trade is done, the move is gone. Let’s move on. — by the time I finish writing this, if you don’t already know what happened in the stock market today, there is your first issue. The headlines popping up on my iPhone are passive, they are old news, the trade happened.

I don’t want to talk anymore about the Dow, I don’t have a position in it, and the record rally opportunity — just took place. But tomorrow there will be new trades to take, even today starting at 5pm.

I want to talk about Crude Oil — When I first started trading futures, there was nothing I feared more than the concept of “shorting crude oil”, that being said, that was the past, and we are focused on the future. So clearly, with the CL trading below 39 a barrel, with record bearishness and everyone screaming we could still go lower. — As a trader, student of finance/markets/economics: I am wondering or dumbfounded how we have still not found “a bottom.”

The number one argument I keep hearing regarding oil is “supply”, people continue to ignore the headlines or other factors that should or could make oil pop higher, and so I would think that until the “supply” story can be exploited otherwise, that argument will keep oil offer.

Well last night we had the biggest inventory drawdown since 2014 in Tuesday API, when it reported unexpected 7.3 million-barrel drop in crude supplies! *Analysts forecasted an increase of 1.9million…

Followed by today, we had EIA results surprising even the whisper # with US DOE Crude Oil Inventories (Aug 21) W/W -5452K vs. Exp. 1450K!

So if the argument is “supply”, yet again, we get draws and surprises to counter than like we did in the past 24 hours with API and EIA… WHY WOULDN’T CRUDE OIL CL BE ABLE TO EVEN END IN THE GREEN, LET ALONE UNCH? *it even almost settled on LOD.

The distillates are clearly not helping, and people are looking at the USD strength, but when the Dow Jones rallies 600 pts and Crude Oil can barely bid higher *after data supporting “maybe we don’t have quite as much over-supply as we thought.” I ask again: WHY WOULDN’T CRUDE OIL CL BE ABLE TO EVEN END IN THE GREEN, LET ALONE UNCH?

So, now where does CL go tomorrow? What will make it move? Take a look at the futures at 5pm and let’s figure it out.

Let’s try again tomorrow. – Happy Trading.

-Bret Rosenthal

Timing: Traders and investors are NOT feeling ‘saved by the bell’

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Ding! Ding! Ding! – Although, again traders and investors are NOT feeling ‘saved by the bell’… If you called the “bottom” today – It would have had to have been at the 5pm futures open yesterday, or around 1am (while asia-europe traded). We had an over $3000+ move per 1 lot of any of the E-Mini Stock Futures markets – BUT IT WAS OVERNIGHT.

That being said, today, as US Traders came into the market, sure there was a couple of points left to the upside for you to eat like a bird. BUT – just like Friday and Monday sell offs into the close — stocks get slammed again, and your crapping out like an elephant. I agree, stocks will “rally higher again”, but they already bounced overnight, be ahead of the moves, or wait, nobody wants a Monday morning QB.

— Why? —

The answer: “Who cares.”, try not to think, but to trade it. If you are focusing on futures markets, the name of the game is right there — we only “care” about the future. So- it’s best not to get caught up and wrapped up around “Why?” the market is up or down 50pts in a hour. It’s okay to be conscious of where we have been, but focus on WHERE ARE WE GOING NEXT?

If you have ever traded anything before you know “timing is everything”, just like an option has its factors regarding timing, and even just buying or selling stock outright (with no leverage) timing clearly matters — So I think the most important lesson that can be learned today again is just that. Don’t be in a rush to get a trade on, don’t think you will miss the trade or miss out on easy money.

It does not take big size in a market where the VIX is moving 5+ vols and the minis are moving in 3-4% swings. — It takes timing.

I know it is easier said than done, but with these dips, typically “bring in new money or new traders/investors” who have been waiting for an opportunity to “buy stocks”. But as you see, we aren’t going to recover overnight or by the 5pm open, it will never stop moving — All you can control is WHEN you are going to be in and out, so focus on that, define the trade, and then execute it.

Personally I am watching/using the stock future market swings as an indicator / proxy for my other trades. (I’m not going head on against this… yet.), I’m focused on oversold commodities and markets that could show inflation LT. BUT: As for this current “crazy” stock market – When the moment or timing is right, I take my best set-ups and take small trades between the large swings.

 

Let’s try again tomorrow. – Happy Trading.

-Bret Rosenthal

//

I would rather have FOMO than lose my MONEY

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More and more traders are starting to mention the concept of “FOMO” – It is the “Fear Of Missing Out” and it is basically fear/greed wrapped up into one slang word that keeps us in and out of trades… but mostly in them.

Days like today are more than tough, they are potentially game/life changing for many Trader’s careers — BUT, ideally, to “live to trade another day” through these types of markets, is an award and privilege in itself.

Today is one of those days when we look back at the chart, we will be able to point and say “Oh that was “Melting Monday” or whatever we will end up calling it. I constantly for a long time would use the lows/levels as reference points from the infamous “Flash Crash” from 2011. The event created more opportunities than just the moment itself.

On Friday, I was long the Spooz ES mini contract, it was already down about 30some points, and I figured after last Thursdays drop, “we could dead cat bounce into weekend at least”). Well I was wrong, (as were many), but I did not blow out, nor did I push against it more. I was using the weekly expiring ES options to leverage up and not only let me get more long deltas in ES, but also protect how much I could lose and how much I needed to hold the position. Overall, with trading, usually you are betting 50/50 in your mind as to “up or down”, so in this case clearly we didn’t go up, so I lost, I was wrong, but I lost what I was willing to lose, didn’t add into the loser, and at the end of the session Friday—- I TOOK THE LOSS.

So sure, that moment sucked and was unfortunate to “lose”–, and the entire weekend, I had more than a little bit of FOMO as I was very worried I would miss out on the “sure to come back rally in stocks”, but clearly it is better to be safe here than sorry, and I get to keep my Money. Which means, “I lived to trade another day.”

Lesson- The market isn’t going anywhere. Don’t sacrifice what you want most, for what you want now. It is better to have fear of missing out (be willing to miss a trade) — than to lose your ability (money) to trade. *Again, simply, “live to trade another day.”

 

Let’s try again tomorrow. – Happy Trading.

-Bret Rosenthal

Does Deere & Co (DE) Weak Historical Performance Mean it’s a Good Short?

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Deere & Co (DE) is a manufacturer of heavy machinery and vehicles for agricultural, forestry and construction applications. The stock is currently trading around $91.20 in a 52 week range of $78.88-$98.23. DE has performed relatively well this year with shares rallying 3.2% year to date. Despite the stocks relatively strong performance this year its chart and historical performance record are indicating it might be a good short ahead of earnings before the bell tomorrow.

DE is set to report earnings tomorrow before the opening bell and the stock record on earnings day is extremely bearish. Over the past 12 quarters the stock sold off on earnings day 9 times with an average move of 2.64%. Currently the options market is implying a move of around $3.00 (3.3% ) higher or lower by tomorrow’s close. The stock is selling off today and is now below the Ichimoku Cloud on the daily bar. With a weakened chart setups and a dismal performance record DE is appearing to set up well for a short.

Using the implied move I can calculate a downside target for DE by tomorrow’s close. I will look to set up an options strategy targeting a move to $88.20 by tomorrow’s close. With this target in place I can now set up an options trade.

Possible Trade: Buying the DE Aug 90-88 Put Spreads for $0.50
Risk: $50 per 1 lot
Reward: $150 per 1 lot
Breakeven: $89.50

Salesforce.com Inc. (CRM) Looking Weak Ahead of Earnings Tomorrow

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Salesforce.com Inc. (CRM) is a cloud computing service that provides customers with customer relationship management platforms. The company’s stock is currently trading around $69.70 in a 52 week range of $51.04-$78.46. The stock has been performing well this year with shares rallying 17.64% year to date. Despite the stocks relatively strong performance through the year CRM is selling off hard ahead of earnings set to be released after the bell today.

The stock has a mixed performance record on earnings. Over the past 12 quarters the stock has rallied 6 times and sold off 6 times with an average move of 6.95%. With stock at current levels options markets are implying that the stock can move higher or lower by $5.35 by tomorrow’s expiration. Although the historical performance of the stock is mixed the chart is starting to look much weaker in CRM. The stock is lower by nearly 3.5% today and is breaking out of value for the month. The stock is now also firmly below the Ichimoku Cloud indicating a move into bearish territory. With a mixed performance history and a weak chat I believe CRM is setting up well for a short position via options.

Using the move implied by the options market I can calculate a downside target of $64.35. I can use the downside target to set up a trade.

Possible trade: Buying the CRM Aug 66-64 Put Spreads for $0.50
Risk: $50 per 1 lot
Reward: $150 per 1 lot
Breakeven: $65.50

Traders Making Big Bearish Bets in Xilinx, Inc (XLNX)

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Xilinx, Inc (XLNX) is a semiconductor and technology company that develops programmable devices. The company’s stock is currently trading around $42.50 in a 52 week range of $36.24-$48.73. The stock has been relatively weak on the year with shares falling 2.17% year to date. The stock has been on a bit of a rebound however with shares rallying after making recent lows post-earnings. Despite the slight recovery in XLNX options traders are putting on some large bearish bets in the name during todays session.

Earlier this morning a trader bought 8,124 XLNX Sep 40 puts for $0.44 while the stock was trading at $42.74. The stock sold off after the order hit and over 20,000 contracts have now traded on that line. The stock moved to session lows after the order hit the tape and as the stock made lows these puts traded as high as $0.60 on the session making this a very profitable trade. Although the stock is off of session lows these puts are still trading near the trader’s entry price. The stock is below the Ichimoku Cloud on the daily bar so this could still represent a decent short opportunity.

Trade: A trader bought 8,124 XLNX Sep 40 puts for $0.44
Risk: $44 per 1 lot
Breakeven: $39.56

I bought these puts for $0.48 on average and took a profit target at $0.60. Including the other blocks that traded on this line XLNX has traded 4.5 times its average daily options volume today meaning this order is very significant.

Lowe’s Companies (LOW) Set to Report Earnings Tomorrow Before the Opening Bell

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Lowe’s Companies, Inc (LOW) is a home improvement retailer with over 1,800 locations in North America. The company’s stock is currently trading around $73.22 in a 52 week range of $49.70-$76.25. The stock is seeing a nice move higher today in sympathy with the move higher in Home Depot (HD) after earnings were reported earlier today. LOW has been relatively strong this year with shares rallying just over 6% year to date. The company is set to report their most recent quarterly earnings tomorrow morning before the bell. Based on the strong historical performance of the stock and the solid technical setup it seems like LOW is setting up well for a long ahead of earnings.

LOW stock has rallied on earnings day 7 of the past 12 quarters with an average move of 4.23%. More importantly, the stock has rallied from earnings day through the nearest options expiration with an average move of 4.64%. The stock is also looking strong on a chart. LOW is trading well above the Ichimoku Cloud and both its 9 and 26 period moving averages. With such strong historical movement and a good looking chart I want to set up a long position in LOW. Market makers are currently implying a move of around $2.70 in LOW by this Friday’s expiration so I can use this to calculate an upside target.

With LOW trading around $73.22 I will calculate an upside target of $75.92 and set up a trade.

Possible Trade: Selling the LOW Aug 75-72.5 Put Spreads for $1.40
Risk: $110 per 1 lot
Reward: $140 per 1 lot
Breakeven: $73.60