CVX Bullish Opening Trade Signal

View CVX Trade

Strategy Details

Strategy & Direction: Long Call Vertical Spread – Bullish

Details: Buy 6 Contracts June 3 $160/$170 Call Vertical @ $3.59 Debit

Total Risk: This trade has a max risk of $2,154 (6 contract x $359 per contract). 

Counter Trend Signal: This is a Bullish strategy on an ETF that is experiencing a bearish 1M trend.

1M/6M Trends: Bearish/Neutral

Technical Score: 10/10

OptionsPlay Score: 106

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade.

Investment Rationale

Here’s a pure trader’s trade in the energy space: Chevron (CVX) already reported quarterly earnings last week, and still has held onto the horizontal support against the March lows of $155.25. In fact, you can see that that same area has held on several days in the past week — never once closing beneath it. We also see a defined double-top near $175, with a new active Propulsion Full Exhaustion level at $170.64 (highlighted in yellow). Given the huge down move yesterday in the market that reversed to close higher, I’m thinking that the overall market (SPX and QQQ) has at least held (for now) their respective important weekly cloud model support that I showed and discussed in Monday’s Technical Market Outlook video. 

With crude oil having recouped large early losses yesterday to also close up on the day, we are going to buy a short-dated CVX June 3 $160/$170 call spread for $3.59 based on Monday’s closing mid-prices. We will stop ourselves out of the long call spread if we see a single daily CVX close beneath $156.24 (last Wednesday’s low). Note: if in this volatile environment you are not comfortable risking the typical 2% of your portfolio on a trade (in this case, 6 contracts on a theoretical $100K portfolio, then do less. No one is suggesting you trade more than what your comfort level is.) Yesterday was a great example of how flaky the market can move right now, so I, too, have cut back size in my recent trading.