How the Dip in ConocoPhillips Stock Can Give You Sweat Profits

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Volatility is haunting the halls of the oil patch. And it’s a phenomenon worth celebrating if you’re an active trader because opportunity always accompanies the V-monster. Indeed, my watchlist is teeming with attractive setups in oil stocks that demand our attention. Chief among them is ConocoPhillips (NYSE:COP).

How the Dip in ConocoPhillips Stock Can Give You Sweat Profits

COP stock just suffered its first significant pullback since launching into a steep uptrend in September. The dip marks the first test of buyers’ resolve. Are they willing to defend their newfound turf or are they going to let sellers steal their lunch?

I suspect it’s the former.

COP’s budding uptrend boasts a rising 20-day and 50-day moving average. The rise has been long and sharp enough, even to start turning the 200-day moving average northward. And that’s saying something. So although this week’s oil swoon delivered a 7% haircut to ConocoPhillips, it should still be viewed as a buyable pullback.

For now at least.


Click to Enlarge
Source: OptionsAnalytix

If the stock breaches the $49 support level and the 50-day moving average, then the retreat is worth reassessing.

But, until then, it’s game on for deploying bullish trades. Today’s doji candle is confirming a slow-down in the selling that has gripped COP for the past week. All we need now is for buyers to kick-off a new upswing. I suggest using today’s high as a trigger for your trade.

If ConocoPhillips stock can rise above $50.65, then pull the trigger.

The COP Trade

One of the reasons I selected COP as opposed to one of the other energy stocks flashing clean pullback setups is that it has one of the higher implied volatility ranks in the sector. High implied volatility is significant to those engaged in options trading because it signals that premiums are juicy, ripe for the selling.

If you’re willing to wager COP will sit above $50 a month from now, then sell the Dec $50 put for $1.10. Your breakeven on the trade is $48.90, so as long as the stock stays above that, you’ll capture some profit. The max gain is $1.10.

By selling the put, you are promising to buy the stock if it sits below $50 at expiration. If you’d prefer to sidestep that particular obligation if the stock drops, then buy back the put if it’s in-the-money at expiration.

As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.

For a free trial to the best trading community on the planet and Tyler’s current home, click here!


Article printed from InvestorPlace Media, https://investorplace.com/2017/11/conocophillips-cop-stock-can-give-sweat-profits/.

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