|This Trade Was Closed March 20, 2013|
Chevron has proven resilient even amidst the Cyprus bank crisis. Very solid stock, that is not worth betting against as it keeps making new highs
Original Trade Post:
Usually as the price of oil goes, so goes the price of Crude producers like Exxon Mobil and Chevron. As you can see from the chart below, over the last 30 days, Chevron has gone up in price, but USO has actually gone down. This is a bearish divergence for Chevron and one that makes for a good trading opportunity.
According to the latest PPI report in February (with data from January), the finished goods energy index fell .4%, which was the 4th straight month of declining prices that producers like Exxon and Chevron have been able to get for the oil that they dig out of the ground and sell. That’s bad for profit margins and can have a negative effect on earnings. I am not sure if this is a seasonal thing or if it is an ominous trend, but we can expect it to continue as long as USO continues to decline lower. Those are some macro headwinds affecting Chevron.
Additionally, there are 2 Lawsuits in progress against rival crude producers XOM and BP. These lawsuits are causing bad headlines for oilc companies, and is a headwind for Chevron too. Exxon also has an analyst day on Wednesday that Jim Kramer on mad money said he is pessimistic about (did not specify the reasons).
Chevron is currently trading at 116.80, near its 52 week high of about $118.53 per share. It’s struggling around this level in the past, looking back to September when it hit intraday highs of 117.50 on 5 occassions, but was never able to close at that high.
The XLE Energy ETF traded sold off into the close of Wednesday and Thursday’s trading sessions – the clear sector laggard in the last 15 minutes of those days. These signs of panic selling into the close are warnings signs this week. The 2 major components of XLE are Chevron and Exxon Mobil. On a sector comparison basis – the XLE is the 2nd worst performing sector in the last 10 days, only bettering the very week XLB Materials sector.
Keep the key level of $118 in mind to determine whether a bearish trend takes place or not. If price breaks out above $118 and closes there, then consider closing this trade
- The Ticker: CVX
- The Trade
- Buy to Open Apr 2013 120 Puts at 3.80 or better
- Trade Opened: March 4, 2013
- Trade Closed: March 20, 2013
Chart courtesy Finviz. Click to open larger.
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