Hey There Income Hunters,
I owe it to The Boss, Bruce Springsteen, at least in part, for my nice ride with Exxon.
Let me explain …
I’ve seen Bruce probably 25 times and I always look forward to hearing him perform “Jungleland” live …
I’ll never forget my first concert in 1976. My father’s friend gave us backstage passes at the Palladium, a small theater in Manhattan. I was 15 at that time and seeing Bruce up close was incredible … but what I remember most is “Jungleland” and Clarence Clemons playing the most beautiful saxophone solo you’ll ever hear.
Since then I’ve always been ready to sing that one line that sent chills down my spine, “They’ll meet ‘neath that giant Exxon sign/That brings this fair city light.”
Live, Bruce will always belt out those lyrics with his fists to the sky …
Now, regarding my trading, about three months ago I decided to hold a core long position in energy stocks into the summer. As I started going through the group and came to ExxonMobil (Ticker: XOM), I put the rest of the reports down and have stuck with the Tiger the whole way.
It got a bit frustrating watching oil rally relentlessly while the energy producers chopped around. But now it’s time for the producers to reap the rewards of their hard work.
ExxonMobil (Ticker: XOM) Reports Better-Than-Expected Q1 Earnings
Exxon reported earnings on April 30 — and was a day I was looking forward to …
Exxon had been doing everything right during the slowdown. When the going got tough during CVID, Exxon got even tougher. How? The company …
- Reduced costs
- Paid down debt
- Increased free cash flow to ensure coverage for dividends
- Repurchased shares to return value to shareholders
These improvements led to a killer Q1:
Revenues were $59.15 billion versus a $56.4 billion estimate
Earnings per share were $.05 above estimates
Oil production was up 3%
It's off to the races in Q2!
Now on to what I believe is the next commodity to soar — silver — and the way for you to play it.
Kill It in Silver by Trading Around A Core Position
Right now is the time to get on the “Silver Bullet Express.”
In the chart below, we see silver trading above all three moving averages. (That’s the 14-day exponential MA and the 50- and 200- day simple MA.) When you have a setup like this, the risk/reward is heavily in our favor.
When we have all three compressed together like this. we get a sharp move away from the area. So the conservative play is to get long right here with a stop below the 200-day MA at $25.50.
Alternatively, we can go with the 6-1 reward-to-risk 25/35 Jan-21, 2022 call spread. I think this is the trade to really get the bang for our buck.
Check Out the Stats on this Trade
We risk $170 to gain $1,000 if SLV closes above 35 by January 21, 2022. I believe SLV will easily be above $35 by then.
The vertical option strategy is the formula for success with commodities. Allow me to explain.
The call spread, which is a vertical option strategy, is a pair — long and short.
- We are long the 25-strike call and short the 35-strike call …
- Assuming we hold the trade through expiry, only three results can occur …
- SLV can settle below 25, in which case we lose our initial debit amount ($170) …
- SLV can expire in between the two strikes, in which case, our accounts would be credited with the difference of the final settlement price and the 25 strike. For instance a close at $27 means you are credited $200 …
- The final settlement price is above $35, in which case, we would be credited the maximum payout of $1,000 so our profit would be $1,000-$170 = $830.
- The other option is your ability to close the trade at any time prior to expiry, in which case, depending on the date, you would earn a portion of the amounts shown under the scenario of the hold through expiry. Here’s an example:
Check out silver’s moonshot out of a similar setup in 2009 …
Now take it a step further … 2022 is going to be another year of high inflation. So, put a second call spread leg on Jan 2023 to capture the more explosive move in the second year of the bull market in SLV. Look at these numbers:
Now you have a 14-1 reward-to-risk ratio on your side.
Not many people believe this type of move is in store for the market, but I fully believe it is.
I’m not being cocky, it's just that these markets will be driven by the global macro forces that I talk about in Power Income every day.
Bring It Home
The consensus narrative is driven by the Fed, the banks and the Wall Street government — who never reveal the true picture …
And they will continue to hide the fact that the Fed intends to keep printing money until their debt is reduced at citizens’ expense.
As #IncomeHunters, we need to rise above the fog of war and get out in front of the money flow. Once the institutions wake up to what’s really going on — and I think they are getting close — it will be hard to chase the markets higher.
The chart below shows the true opportunity ahead of us: commodities are at the very beginning of a multi-year bull market.
Chart via SilverChartist.
It’s time to get set up for the ride of a lifetime. As always …
Live and Trade With Passion My Friends,