Top Stock Trades for the Week of May 14, 2022

  • Oil strength makes the energy sector a prime area to shop for top stock trades.
  • Occidental Petroleum (OXY): Momentum traders are all over this high-flying, Warren Buffett-backed company.
  • Marathon Oil (MRO): Offers a low share price with an imminent breakout
  • Chevron (CVX): Close to completing a two-month basing pattern that should bring new buyers to the yard.
miniature oil barrel and oil well figures on top of stack of money
Source: Shutterstock

Crude oil was making waves with another breakout on Monday. Prices topped $114 in a move that has consumers crying but traders buying. If the absolute performance wasn’t enough to impress, the relative performance certainly is. Nearly every other asset has fallen prey to the bear market – stocks, bonds, gold, copper; you name it. Oil and, by extension, energy stocks have been the only place to hide. As I surveyed my watchlist for yet another round of intelligent stock trades for the week, energy demanded the most attention.

Many companies saw their share prices follow crude higher on Monday. The gains were a bright spot in an otherwise dull market that saw equities waffle. The Energy Sector ETF (NYSE:XLE) tagged a fresh seven-year high and is now up 50% for 2022. Here are three of my favorite oil stocks to buy now.

Ticker Company Price
OXY Occidental Petroleum $67.72
MRO Marathon Oil $27.98
CVX Chevron $173.01

Top Stock Trades: Occidental Petroleum (OXY)

Occidental Petroleum (OXY) stock chart with bullish breakout.

Ever since Warren Buffett announced taking a stake in Occidental Petroleum (NYSE:OXY), its shares have been on a tear. The year-to-date gains have ballooned to 137%. OXY stock gained another 6% Monday on the heels of the oil breakout, making it one of this week’s top stock trades. The exploration and production company has become a favorite among momentum traders. The appeal is straightforward. There isn’t any competition due to the carnage inflicted on high-beta growth stocks elsewhere in the market.

OXY will lose steam at some point, but I’d advise against trying to pick a top. The easier play is to join buyers in playing the uptrend. Monday’s rally is pointing the way to higher prices. To fully capitalize, I like buying call spreads.

The Trade: Buy the June $70/$75 bull call spread for $1.70.

You’re risking $1.70 to make $3.40 if OXY rises to $75 by expiration.

Marathon Oil (MRO)

Marathon Oil (MRO) stock chart with bullish breakout.
Source: The thinkorswim® platform from TD Ameritrade

While not as eye-popping as OXY, the 71% gain this year in Marathon Oil (NYSE:MRO) is still impressive. The steady uptrend and consistency of the rising 20-day and 50-day moving averages as support have made MRO stock a quality trading vehicle. The low price tag and modest implied volatility support strategies like naked puts and covered calls.

The pattern that caught my eye and made the stock worthy of including for this week’s stock trades is the bullish breakout. Monday’s 4% gain has the stock testing $28 resistance. A successful break here should lead the way to more upside. Let’s go with naked puts to generate a higher probability of profit.

The Trade: Sell the June $23 puts for 50 cents.

Consider this a bet that MRO sits above $23 at expiration. If it does, you’ll pocket the 50-cent premium.

Top Stock Trades: Chevron (CVX)

Chevron (CVX) stock chart with bullish breakout.
Source: The thinkorswim® platform from TD Ameritrade

Chevron (NYSE:CVX), the last of this week’s top stock trades, first tagged $174 on March 8, and it’s done nothing but slither sideways since. While frustrating for those who chased long entries at the height of the early-March run, the two months of consolidation is a welcome development for breakout traders. It’s allowed the stock to digest overbought pressures while creating a clean base to trade from. Monday’s high-volume jump has prices pushing into the top-end of the range.

A rise over $175 will confirm the breakout and be a buyable event. To cheapen the trade price, consider buying call spreads. You can shrink or widen the spread width to fit your desired risk. Here’s a smart structure to get you started.

The Trade: Buy the June $175/$185 bull call spread for $3.20.

The max loss is $3.20, and the max gain is $6.80.

On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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