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The S&P 500 Volatility Index (INDEXCBOE:VIX) has spiked over the past few days and is now sitting just below the 17 level that I have been monitoring for a few weeks now. On the other hand, we are coming up on the end of the second quarter and the beginning of a new month, which usually have a bullish bias as fund managers do some rebalancing in their portfolios.
That being said, I’m betting on additional downside ahead, as we saw a pretty strong one-day reversal on Wednesday that has yet to be recovered. The S&P 500 traded up to about 2,745 early in the day before falling to close right under the 2,700 level. The index dropped below that key support level again yesterday before recovering, but the short-term trend still appears to be to the downside.
One area that does look good for the bulls, though, is the energy sector, which has still not really caught up to the price of WTI crude oil yet. With crude trading above the $73.50 per barrel level for the first time in about four years, I’m expecting the oil stocks to play catch-up, and that is why I am recommending a bullish energy play today:
Buy to open the Chesapeake Energy Corporation (NYSE:CHK) Sep 5 Calls (CHK180921C00005000) at $0.75 or lower.
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InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.