Oil and energy is a big “talk of the town” lately. I personally pay $3.17 for a gallon of gas here in Middle Tennessee. With my rewards credit card, I get an additional three cents off per gallon, so I don’t mind the $3.14 that I currently pay. I still drive 30 miles each way to work, but that’s a problem that will be solved later than sooner.
Regardless of oil prices, tariffs, taxes, or the election, this is a pretty easy trade set up. Remember: the price discounts everything.
Pioneer Natural Resources (PXD) is an oil/gas/drilling company in Texas. Let’s discuss 3 potential trades on this company.
THE SETUP
First, if we get a close below $99.33 I feel a bearish trade would be most probable. The $100 area is quite a strong support. Also, the 200 simple moving average is around $101, which will tend to act as more support.
TARGETING AND RISK MANAGEMENT
If my bearish trade triggers, I would place my stop above the 200 SMA. My first target would be the 100 SMA (the teal line on my chart) and the second target would be very close to $90.
A SECOND OPTION
A second trade that could be considered would be if we close above $107.60. In this case, placing a bull put spread under the 200 SMA should work wonders. I would place either a 100/95 or 95/90, if there is any money in the 95/90 at all.
FOR STOCK HOLDERS
The third trade would be if you own at least 100 shares of PXD. If so, depending on where you purchased, you should already be quite profitable on this stock. If we close above $107.60, you could consider selling a $115 call option as the $115 area has proven to be strong resistance for the better part of 7 months. Of course, that is where you want to sell covered calls – at locations where resistance is strong. In addition, $115 is close to the all time high.
So, if you do get exercised (which isn’t a bad thing) it would be for an overall profit. And overall profits are equivalent to finding an extra $20 bill tucked in your shoes, leaving you wondering, “Seriously. How and why is that there?!?!”
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