Don here...
Blake Young just identified a commodity divergence that points straight to stagflation. Crude oil blew through resistance at $78 today and hit $81.04 while copper dropped 1.74% and is flashing sell signals.
Rising energy costs plus falling copper demand is the textbook stagflation setup. Inflation without growth.
Blake has been warning about an oil topping pattern for weeks. Today the market proved him wrong as crude ripped through his $78 level.
With geopolitical conflict still pressuring supply, Blake now sees oil potentially running to $90.
That changes the playbook for energy stocks. Blake pointed out that energy companies don't need oil prices to keep climbing.
They just need prices to hold above $66, where margins are strong for US producers. Oil at $81 gives these names serious room to run.
Copper tells the opposite story. Blake flagged a sell signal on his monkey bar indicators, with an initial target of $5.75 and a potential drop all the way to $5.40. That would represent a 10% decline in copper prices and confirm what the market is quietly pricing in: demand is evaporating.
Tomorrow's non-farm payroll report could make things worse. The forecast sits at just 58,000 jobs versus 130,000 last month. Blake noted the margin of error on readings below 200,000 means this number could come in negative, which would confirm the stagflation thesis.
Blake walked through specific trades on both sides of this divergence in tonight's video:
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Devon Energy (DVN) is breaking out of its Bollinger Band with a 10% upside target to $48. Blake outlined a short put at $44 collecting 4% premium with a safety net down to $42.30 before any loss.
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Coterra Energy (CTRA) shows an almost identical setup with a $3 upside target. The at the money short put pays 4.8% return on risk with a cost basis of $29.50 if assigned.
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Southern Copper (SCCO) is breaking down from $190 with a potential 15% drop to $160. Blake detailed a bearish call credit spread at the 197.50/200 strikes collecting $1.25 to $1.30.
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Freeport-McMoRan (FCX) broke below $61.86, targeting $56 for another 10% decline. A short call vertical at the $65 strike on a dollar wide spread collects 35 cents.
Click here to watch Blake break down the crude versus copper divergence and each trade setup
To your success,
Don Kaufman
Chief Market Strategist, TheoTRADE
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