Those Oil Traders Deserved to Get Burned!

Alan KnuckmanI’m back in locked-down Chicago this week to help my daughter adjust to her new virtual school schedule.

We’re making the best of the “new normal” here in Chicago and back at my Michigan compound. Cooking is my main stress reliever, so I’ve been putting my skills to good use while we’re stuck indoors. In fact, I even have three grills on my 41st floor deck. You can bet I’ll be firing up a few delicious meals before heading back up north later this week…

Soaking up some spring Chicago sunshine…

Unfortunately, I suspect there are some oil traders who aren’t feeling very relaxed this week as crude staged its epic meltdown.

But here’s the ugly truth: anyone that lost money during yesterday’s oil debacle must have worked very hard to get caught in that mess. Why? Because brokerage firms force you out of positions when the contract is coming to an end so that you can’t get caught in the nonsense of a physical-delivery futures contract.

Only a handful of May positions were left that hadn’t been closed out and a reverse short squeeze got the “smart guys” who were playing with fire. It was strictly a May contract settlement issue not any systemic issue. Frankly, those that lost money deserved it. I know that sounds harsh — but those are the facts!

Bottom line: You can look at this oil rout as a total disaster or move on and look for how to profit from the mess. I chose the second option. Good or bad, I always look at everything as an opportunity. That’s just how my mind works.

I’ll touch base with you again later this week before I head back to my Michigan lake house on Thursday.

Keep it In the Money,

Alan Knuckman

Alan Knuckman
Editor, In-The-Money

Chart of the Day: Hiding in plain sight?

Alan KnuckmanThe devastation in the oil market continued Tuesday as traders started to frantically pound the sell button on their June crude contracts. The price of a barrel of oil dropped nearly 40% by midday to a little more than $12 bucks a barrel.

The carnage also spread to the stock market, where the major averages all continued to slide into afternoon trade. The Nasdaq led the way as many of the high-flying tech names that were holding up so well in this market were hit with heavy profit taking. Even the mega-cap tech traders were feeling the heat as red-hot plays like Amazon.com (NASDAQ:AMZN) and Microsoft Corp. (NASDAQ:MSFT) dropped approximately 4% before lunch.

Despite the selloff, we’ve found one corner of the market that might offer some shelter from the storm — and it’s not far removed from the shores of the hot tech trades that have kept many a bull afloat during these turbulent times…

I’m talking about biotech stocks.

The iShares Nasdaq Biotechnology ETF (NASDAQ:IBB) has posted an incredible recovery off its March lows, storming back to new multi-year highs earlier this week. No, biotechs weren’t immune to yesterday’s sharp selloff. But the chart remains intact if the bulls can hold the line here:

The coronavirus pandemic has helped light a fire under this fresh biotech move. We mentioned Gilead’s new COVID treatment Remdesivir earlier this week — and this big biotech certainly isn’t the only one working to combat the virus. Playing the biotech basket could be a way to capture some upside in these difficult conditions.

Trade Idea Update: Slack Technologies Inc. (NYSE:WORK)

I highlighted popular stay-at-home stock WORK in your Monday issue. The stock was on the cusp of a potential breakout — only to take an 8% drubbing yesterday.

Thankfully, our breakout never triggered. Remember, we were looking for this stock to jump after a clean break of the $30 level. That’s been a brick wall for this stock going back to early February.

As I noted Monday, WORK a relatively new stock that has experienced some serious volatility so far this year. Yesterday’s rout might be just what the doctor ordered. After all, the market loves to shake out the weak hands.

I have a feeling this story isn’t over yet…

— Greg Guenthner

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Alan Knuckman

Alan hails from the home of options trading in Chicago, where he began working as a clerk on the floor of the Chicago Board of Trade (CBOT). Beginning with his days on the floor, Alan’s worked with all aspects of the options markets for the past 25+ years.

Transitioning from a clerk to a floor...

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