Trade Idea: Exxon Bear Call Spread

The market probably needs a bit of a pause here so I wanted to add a Bear Call Spread. I analyzed the Dow stocks because they had good option liquidity and tight spreads and found that Exxon (XOM) was one of the most bearish looking charts (no surprises there).

I was actually bullish XOM late last year as a turn around play which turned out to be one of my worst calls ever, but hey it happens.

I got stopped out of my long-term put spreads in March and now the stock is bouncing back but looks like it will have trouble with the declining 50-day moving average.

On the chart I’m also not seeing any sign whatsoever of accumulation so I think this latest rally is just a dead cat bounce.

I’ll use the 50-day moving average as my stop loss and if XOM closes above that level, then I’m out of the trade.

Earnings are also set for May 1, so I might end up closing it before then.

This trade has a $375 profit potential on capital at risk of $875 for a potential 42.86% return.

Let’s see how it goes.