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June 29, 2009
We are back from Oasis 2009 and if you missed it, you missed a great event. We had more than 90 breakout seminars from our great instructors as well as George and myself on the main stage. From the opening commencement featuring the National Guard, to the onslaught of education, to the closing ceremonies and comedy club, we definitely won't forget Oasis 2009.
One of the most popular of the main stage appearances that George and I do each year is a 90-minute session we call market outlook. During this session, we go over top stocks, and the technical and fundamental outlooks of each, followed by an option case study involving risk and reward. I want to use one of these as an example in this article.
Chart 1: Murphy Oil Corp - MUR
Murphy Oil company is one that has been around for generations. Most people think of Murphy Oil Soap, which is one of their staple products that continues to be a high flyer for the company even today. Taking stock in their fundamentals, they offer a long-term value as the stock has dropped to half price since last year, but still remains sound. In fact, it's a hit among Growth and Income Investors.
Chart 2
Technical traders are equally impressed. Currently in a Wave 4 Buy situation, this stock looks to continue its push upward by another 20% from current prices. That would put it in the 65-70 range if this happens.
Chart 3
The option trade we presented was a simple one" a Call Spread. This involves buying a lower strike call and selling a higher strike call to cut the cost. In the example above, we are buying the 55-70 Bull Call Spread. The example shows a cost of 4.55 or $455 per spread.
Chart 4
Finally, the case study has a graph that looks like this. It shows the absolute risk on expiration day at $455 if the stock is below 55 a share. The maximum profit potential for this trade is $1045 as shown in the risk graph.
Hope you enjoy this little slice of Oasis 2009. I will be taking a vacation break for a couple of weeks but will return with a new article on the weekend of July 20th.
Good Trading!
Tom Gentile
Chief Strategist
Profit Strategies Group, Inc
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