Occidental Petroleum (OXY): An Explosive Summer Profit Opportunity!

| June 2, 2014 | 0 Comments

Editor’s Note:  After today, our office will be closed the rest of the week for summer break. You will receive your next article on Monday, June 9th.

Something very interesting is happening with shares of Occidental Petroleum (OXY).

Over the past few months, investors have kept shares of the international oil and gas behemoth in a relatively tight trading range between $94 and $98 a share.

But that changed late last week…

OXY broke above important technical resistance at $98 a few days ago.

What’s the big deal about that?

Let me explain…

First of all, the overall technical situation in OXY is very bullish.  Choppy and directionless trading action has lulled investors into a bit of a trance over the past few months.  As a result, one of my favorite trading indicators, the ADX, is sitting near 10-month lows.

What is the ADX?

This indicator gives investors an idea of how much any particular market is trending.  When the ADX is low (below 15), there’s very little trend.  When the indicator is high (above 30), there’s a strong trend.

As of today, OXY has an ADX reading of 13.

Let me show you what I mean…

Occidental Petroleum

As you can see, the choppy trading action has kept OXY (green line) is a trendless funk since March.  Due to the recent lack of direction, the ADX is trading near yearly lows (red circle).

But also notice how OXY’s daily highs and lows are squeezing into a tighter and more condensed trading range (blue lines).  This tightening range is also known as a consolidation pattern.

Now listen closely…

When you mix a consolidation pattern along with a low ADX reading, you get an explosive profit opportunity. 

Once shares break out of the consolidation pattern, momentum investors tend to come roaring back into the market.  And when momentum is once-again established, the ADX indicator starts rising- signifying a new trend is about to start.

This information alone should make you sit up in your chair and take notice.

But wait, there’s more…

The bullish technical situation isn’t the only thing OXY has going for it.

Over the past three months, company insiders have purchased just over 37,000 shares on the open market.  In case you’re unaware, insider buying is a great sign that the people who know OXY best believe shares are undervalued.

And that’s not all…

A highly unusual options trade crossed the tape in early April.  A well-heeled investor bought 30,000 OXY August 2014 $105 calls when the contracts were trading for $85 a piece.

That amounts to a $2.5 million bullish options bet!

If OXY doesn’t trade at $105 or higher by the third Friday in August, these contracts expire worthless. 

Clearly, somebody has enormous conviction on the future direction of OXY.

I don’t know about you, but all this information is making me quite excited about this large-cap oil and gas producer over the next few months.  As a matter of fact, I purchased a hefty portion of OXY call options with June, July, and August expirations in last week’s session.

If you’re looking for a summer profit opportunity, I suggest you give OXY a very close look!

Until Next Time,

Justin Bennett

***Editor’s Note***  This is the type of analysis the goes into each one of my Options Profit Pipeline recommendations.  This revolutionary trading service focuses specifically on commodities and the companies producing them.  If you’d like to discover what the Option Profit Pipeline is capable of, click here.

A recent trade in Goodrich Petroleum (GDP) is up over 700%!


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Category: Commodities

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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