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Trade of the Day: Occidental Petroleum Corporation (NYSE:OXY)

Oil companies are in jeopardy right now


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I’m bearish on crude oil, as it looks like it could move lower — possibly even a lot lower.

This is contrary to what usually happens in March and April, when oil usually sees a nice move to the upside, but it doesn’t look good right now. The commercial oil traders are positioned extremely short at the moment, and more so than they’ve been in a long time.

These are the people that kind of hedge their positions and try to grab prices when they’re higher, and that could indicate that we may see a bigger move down in oil. These people are usually the “smart money” in the trade, so maybe they know something that we don’t.

The problem is that there is just too much production, which has put a ceiling over how high prices can go. That would put a lot of oil-producing companies in jeopardy, especially the weaker ones, with a lot of debt.

Given all this, today I’m recommending a bearish trade in Occidental Petroleum Corporation (NYSE:OXY).

Buy to open the OXY May 60 Puts (OXY170519P00060000) at $0.90 or lower.

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