Trade of the Day: Marathon Oil (MRO)

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We’ve opened a new bearish trade on Marathon Oil (MRO). After completing another bearish continuation pattern a few days ago, MRO is ready to break through support just above $7 in the run up to the company’s earnings announcement on Feb. 17, after the market closes.

MRO has been struggling along with the rest of the energy sector — especially oil-exploration companies — as oil prices have continued to fall. Things have been especially rough for Marathon Oil with its exposure to oil-sands mining. Oil-sands mining is the most expensive method for extracting oil from the ground, and now that oil has broken below $29 per barrel, we expect MRO to be subjected to even more bearishness.

We have a short-term price target of $6 for MRO and expect the stock to reach this level before its earnings announcement. If the move happens quickly enough, we will likely exit this trade before the earnings announcement to maintain the premium inflation that should come with high levels of implied volatility.

‘Buy to open’ the MRO March $7 Puts (MRO160318P00007000) for a maximum price of $1.10.

While we have continued to see elevated volatility this week, as options traders we prefer — and even depend — on these market gyrations to bring us our profit more quickly. However, because of these swings, we typically steer clear of using stop losses because they can prematurely take you out of a viable trade. Instead, we focus on the underlying stock and its technical and fundamental analysis to let us know when to exit a trade.

You can learn more about identifying price patterns and using them to project how far you think a stock is going to move in our Advanced Technical Analysis Program.

InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next SlingShot Trader trade and get 1 free month today by clicking here.


Article printed from InvestorPlace Media, https://investorplace.com/2016/02/trade-of-the-day-marathon-oil-mro/.

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