This Micro Move Produced a Handsome 36% Gain

[Trading With Larry Benedict]( This Micro Move Produced a Handsome 36% Gain By Larry Benedict, editor, Trading With Larry Benedict After a two-year bull run, oil has had a very mixed 2023. The Energy Select Sector SPDR Fund (XLE) is an ETF that invests in oil and gas producers. It has 42% of its holdings tied up in just two stocks: Exxon Mobil (XOM) and Chevron (CVX). And it was recently trading right back where it was in early January. That’s despite OPEC+ production cuts, geopolitical unrest, and a U.S. economy that’s still adding jobs. Those are all factors you’d expect to send the oil price rallying. But XLE’s longer-term sideways pattern has still offered plenty of short-term tradeable swings. Recommended Link [Market Wizard who made $95 million for his clients in 2008 – and predicted the 2022 collapse – reveals his strategy:]( [image]( The One-Ticker Retirement Plan How to make all the money you need – in any market – using a single stock. [Click here for the name of the ticker…]( -- Look at XLE’s rally from March into April (before it sharply reversed). Or there was XLE’s two-month rally from late June – before it peaked and rolled over in September. Yet today, I want to concentrate on XLE’s more recent action. It was much smaller than XLE’s previous moves… But it still produced a tidy 35.8% gain for members of my options advisory, The Opportunistic Trader. What’s more, that gain came in just eight days despite the trade initially not going our way… Capturing a Countertrend Rally On the chart below, you can see XLE’s rally from June through September. After peaking on September 14, XLE reversed andwent on to make a series of lower highs (and lower lows). That’s a common bearish pattern. Energy Select Sector SPDR Fund (XLE) [chart] Source: e-Signal We can see XLE’s reversal from its September peak inthe action of our moving averages (MAs). The 10-day MA crossed and accelerated below the 50-day MA. And both MAs dropped. But even within this downtrend, there were a number of smaller countertrend rallies. The RSI sparked the first one in September by rallying off support (green line). The remaining moves came with the RSI bouncing off (or near) oversold territory. The decisive pattern in each of these rallies was the RSI swinging higher. And a repeat of this move helped provide the setup for the long XLE trade we opened on December 6. That long trade involved buying an $82 call option with a February 16, 2024, expiry. Yet other factors contributed to us making that trade. The release of an oil inventory reporthad sent crude oil down another 4% and extended its slide. That was despite OPEC’s continued threats to cut oil production. Put simply, prices had overextended themselves to the downside beyond what the fundamentals were telling us. I’ve also learned over many years that prices tend to revert to the mean after the initial move following economic indicators (like oil inventory reports). That applies in either direction. Free Trading Resources Have you checked out Larry's free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. We aimed to capture this mean-reversion characteristic with our trade. But as the chart shows, after opening our position, the trade didn’t initially go our way. Instead, XLE tracked sideways over the next five trading sessions. Take another look: Energy Select Sector SPDR Fund (XLE) [chart] Source: e-Signal Momentum was returning, though (orange line). That was pushing XLE higher. And we closed out our trade on December 14 by selling our call option for a 35.8% gain. Of course, we generated this return in a short period by trading options. Options often magnify our profits compared to trading the stock itself. Yet this trade shows that even a tiny underlying move can still supply us with some handy gains. Regards, Larry Benedict Editor, Trading With Larry Benedict Mailbag Do you expect another rally for oil? Send us your thoughts at feedback@opportunistictrader.com. IN CASE YOU MISSED IT… [Is THIS why Elon Musk left ChatGPT?]( Elon Musk co-founded OpenAI, the company behind ChatGPT. Then Musk left ChatGPT to create his own AI startup. And Elon’s AI promises to be 100 times stronger than ChatGPT. Here’s the key fact: with Elon’s three earlier startups… PayPal… SpaceX… and Tesla… You could’ve turned $300 into $647,000. Can Elon do it again with his AI startup? See for yourself right here in a [shocking 2-minute live demonstration of Elon Musk’s AI.]( [Click here to watch the demo.]( [image]( [The Opportunistic Trader]( The Opportunistic Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.opportunistictrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. 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