Last Friday, we talked a bit about the energy markets and how we had traded Permian Basin Royalty Trust (PBT) in my Alpha Stocks research service.
As a reminder, subscribers had the chance to book a 21% gain in PBT shares in just over two weeks.
Well, since then, the price of crude oil in the futures market has jumped another 5%, from about $116 per barrel to nearly $122 per barrel.
Daily Chart of Crude Oil Futures (CL) – Source: TradingView
Energy is the strongest sector out there right now, and it’s showing.
The crude oil chart was able to rally above resistance this week and put in a solid 2.3% gain in yesterday’s session.
Even before the political conflicts that continue to develop in Europe, the market favored higher prices for both crude and refined energy products.
And despite some forecasts for subdued US and global economic growth for full year 2022 this week, demand should continue to outpace supplies in this sector.
With that in mind, I want to revisit the energy market today and talk about another trade idea from our Watchlist two weeks ago that is currently in play.
In the May 30 Watchlist Update, I included an idea for The United States Oil Fund, LP (USO).
This is a $2.9 billion exchange-traded fund (ETF) that tracks the price of crude oil, but it trades like a regular stock.
I watched this trade for a few days after publishing the Watchlist, and when it started to break out, I made it an official recommendation in my Stealth Trades research service.
Daily Chart of The United States Oil Fund, LP (USO) – Source: TradingView
Here’s an excerpt from what I told Stealth Trades subscribers in the official alert…
“The United States Oil Fund, LP (USO) is setting up in a textbook breakout pattern. USO is an exchange traded fund that tracks the price of crude oil.
Shares have consolidated beautifully since the March high to form an ascending base with decreasing volume.
Energy stocks have been one of the few areas of the market showing gains in 2022. But the price of oil got ahead of itself in March, causing prices to pull back and consolidate in an orderly fashion.
Pullbacks have become shallower from left to right on the chart as daily volume has decreased.
This is generally a sign of institutional accumulation as they absorb sellers and the stock becomes harder to buy. In other words, less supply is coming to market.
When you have an increase in demand and a decrease in supply, prices can rise quickly.”
Tracking the Trade
According to our Trade Tracker, we entered USO at $84.20 on May 26 in Stealth Trades. And with the ETF closing yesterday at $91.99, we are already sitting on an open gain of 9.3%.
However, because the energy market is so hot right now, I am probably going to let this trade develop a bit further.
If we can see some further gains, I will likely recommend taking partial profits in USO while raising the stop loss level.
That way, we can use the profits from the first portion to “finance” the risk on the rest of the trade, and I can make sure we come out ahead even if the stock starts to turn against us.
I’ll do my best to update you on this position as it progresses…
Stealth Wins
Now, I fully expect that this USO idea will turn into a very successful trade, similar to what we experienced with Permian Basin Royalty Trust.
We will likely be taking our profits off of the table in pieces in order to maximize our gains and minimize the potential for losses.
But in order to get my exit alerts when it’s time to take profits in USO, you have to be a Stealth Trades subscriber!
According to our Trade Tracker, Stealth Trades boasts a 69.2% win rate on closed trades, with an average gain on winning trades of 11.6%…
Embrace the surge,
Ross Givens
Editor, Stock Surge Daily
