Occidental Petroleum Setting Up To the Upside

The tech-heavy Nasdaq is set for a big down day after Facebook (NASDAQ:FBWealth Strength IndexAAPL is Extremely Up and trending Up) published quarterly results that underwhelmed investors and sent the social media giant hurtling toward its biggest share price decline ever (see below). Collateral damage was spread quickly after-hours as investors fled the sector. Apple (NASDAQ:AAPLWealth Strength IndexAAPL is Extremely Up and trending Up) lost close to 1%, while Facebook’s “FANG” brethren, including Amazon (NASDAQ:AMZNWealth Strength IndexAAPL is Extremely Up and trending Up), Netflix (NASDAQ:NFLXWealth Strength IndexAAPL is Extremely Up and trending Up) and Google (GOOG, GOOGLWealth Strength IndexAAPL is Extremely Up and trending Up) shed about 2%-3%.

*Source:  Seeking Alpha

Let’s consider Occidental Petroleum Corporation (ticker: OXY):

The VantagePoint platform recently indicated upside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out three significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black simple moving average on July 23rd.  We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN position back on that same day.  This indicator measures strength and weakness for a 48-hour period, in this case strength.  The move to the GREEN position further makes the case for a potential bullish scenario. We also have the predicted high and low above yesterday’s actual high and low indicating further strength.  I want to play the VP bullish indication.

Strategy Discussion

If one was strictly a stock trader, buying OXY in the $84.50 area could be prudent.  You are anticipating a move to the upside.  As a protective measure, it is always good practice to place a sell-stop order.  In this case, placing that order in the $83.00 area will mitigate potential losses.

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

Because of the reasons given above, the purchase of a debit call spread may be one way to approach this situation.  The first thing that you want to do is calculate your target price.  In order to perform this calculation, you need three pieces of information:  current price, expiration date and the implied volatility for that expiration date.  For OXY this calculation yields a target strike of ~$86.50  You may want to consider the OXY August 3rd weekly expiration 85.5/86.5 call spread, buying it for $0.25.  The most you lose is the premium paid and the most you can gain is the width of the spread less any premium paid.  Max risk = $0.25 and max reward = $0.75.  This means that you are getting odds of 3.00:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.

Position Update

Please recall last week we discussed TMUSWealth Strength IndexAAPL is Extremely Up and trending Up.  We highlighted a strong indication of downward momentum.  We identified the TMUSWealth Strength IndexAAPL is Extremely Up and trending Up August 3rd weekly expiration 56/58 put spread buying it for $0.47.  Your max risk was what you paid for the spread and the most you could profit is the width of the spread less any premium paid.  Max risk = $0.47, max profit = $1.53.

Here’s today’s chart:

TMUSWealth Strength IndexAAPL is Extremely Up and trending Up-7-26-18-300x179-1.png" sizes="(max-width: 866px) 100vw, 866px" srcset="https://zone1-a365.kxcdn.com/wp-content/uploads/2018/07/TMUSWealth Strength IndexAAPL is Extremely Up and trending Up-7-26-18-300x179-1.png 300w, http://news.wealth365.com/wp-content/uploads/2018/07/TMUSWealth Strength IndexAAPL is Extremely Up and trending Up-7-26-18-768x459.png 768w, http://news.wealth365.com/wp-content/uploads/2018/07/TMUSWealth Strength IndexAAPL is Extremely Up and trending Up-7-26-18-610x365.png 610w, http://news.wealth365.com/wp-content/uploads/2018/07/TMUSWealth Strength IndexAAPL is Extremely Up and trending Up-7-26-18-244x146.png 244w, https://www.prospertrading.com/wp-content/uploads/2018/07/TMUSWealth Strength IndexAAPL is Extremely Up and trending Up-7-26-18-50x30.png 50w, https://www.prospertrading.com/wp-content/uploads/2018/07/TMUSWealth Strength IndexAAPL is Extremely Up and trending Up-7-26-18-125x75.png 125w, http://news.wealth365.com/wp-content/uploads/2018/07/TMUSWealth Strength IndexAAPL is Extremely Up and trending Up-7-26-18.png 988w" alt="" width="866" height="517" />

You can see that TMUSWealth Strength IndexAAPL is Extremely Up and trending Up did exactly what we anticipated.  We exited our spread for $0.75 on July 24th to realize a profit with an ROI of 59.57%!