I read about Valero Energy Corp (VLO) in this week’s Barron’s and after charting it yesterday I entered an alert to email me if VLO traded above 65. It crossed that line in the first 30 minutes of trading today, but I was in a meeting and waited to come back to my account to trade. I checked it before lunch and saw it was up. I was curious if it would stay up, so I waited until I got my lunch and came back to my desk.
I should have stuck with my original thought process from yesterday to know 65 was a big technical mark to cross. That pushed VLO above the downward trending line it had been following and it just kept going. I’ve circled that break in the line in red. Also in that red circle you can see where VLO found support on the new upward trend line that seems to have formed. I was happy with just that, but also saw that VLO is above its 10 day moving average again today after closing above it yesterday.
I had planned to sell naked calls on it in my taxable account, but opted to trade my remaining cash in my IRA. I bought 200 shares of VLO for 65.60 and paid $13,129.97 with commissions and entered a limit order to sell two January 65 covered calls (VLOAM). Those hit a few minutes later and I received $648.49 after commissions as VLO continued its climb. I don’t doubt that VLO will continue to be a volatile stock, but that’s one of the reasons I bought it in my IRA. I’ll hold it for a while if needed and continue to write covered calls on it. I reduced my cost down to $62.40 with these calls, so I have a good cushion on it. If it keeps climbing, my annualized gain will be around 35%.