Weekend Trader Alert
January 1, 2023
Open Positions Update
The following is this week's recommendation:
- Close the Verizon (VZ) April 21, 2023, 40-strike put on Tuesday, January 03. Close the position at a limit price within the range of the current market price when you place the order.
Most Recent Recommendations Chevron (CVX)Place a limit order to buy the Chevron (CVX) March 17, 2023 170-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, December 30, this option was offered at $16.10. CVX closed at $179.49 on Friday, December 30.Do not attempt to enter this position after Tuesday's close.Please use the following guidelines to manage the position:
- Exit the position if the option is at a 100% gain from your entry price.
- If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, January 30, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Shares of energy firm Chevron (CVX) are bull flagging on the charts, after a short-term downtrend channel breakout. The equity's +50% year-to-date level has been acting as support, as it slopes higher and holds above its 20-day moving average. With this solid technical foundation in place, we're initiating a new long position on CVX.
There are a few concerns to be on the lookout for, including potential resistance at the $184 through $186 range. A break below the aforementioned trendline could also potentially pressure the stock's price action, as it has typically followed the moving average during bull runs. Further, a break below $174 could potentially send the shares to the 80-day moving average, at the very least.
However, an unwinding of pessimism amongst the brokerage bunch could certainly give the shares a boost. Currently, 16 of 30 covering Chevron stock recommend a "buy" or better rating, which leaves room for analyst upgrades.
Similarly, options traders have been more bearish than usual, and an unwinding of this pessimism could add tailwinds. Data at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows CVX sports a 50-day put/call volume ratio that stands higher than 99% of annual readings.
Those looking to speculate with options can do so for a bargain right now. Chevron stock's Schaeffer's Volatility Index (SVI) of 28% stands in the relatively low 25th percentile of readings from the past 12 months, meaning options traders are pricing in low volatility expectations at the moment. Our recommended March 170 call has a leverage ratio of 7.58, and will double on a 12.6% rise in the underlying shares.
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