Worley Momentum Strategy

Worley provides engineering, procurement and construction management to energy, chemicals and resources customers worldwide. Its backlog (~A$16.7bn) reflects committed customer projects, so when capital spending rises - higher commodity prices, new FIDs, large contract awards - Worley's order book and earnings grow. Its share price tends to lead or reflect the broader energy/resources capex sentiment.

Value investing asks 'what is this stock worth?' and buys when price is below intrinsic value. Momentum asks 'which direction is price moving?' and buys stocks already rising. Value buys cheap stocks hoping they'll rise; momentum buys rising stocks expecting them to keep rising. Both can work, but require different approaches.

12 and 26 periods are the classic MACD combination, widely used by traders globally. This creates somewhat self-fulfilling behaviour as many traders watch these levels. For Worley, these periods work well because the stock trends for extended periods during capex cycles. The 12/26 combination balances responsiveness with noise filtering.

That's why stop losses are essential. Place your stop at 2x ATR below entry or below the recent swing low. If price drops to your stop, exit with a small loss (should be ~2% of capital if sized correctly). Not every momentum signal works - the edge comes from winning trades being larger than losing trades.

Best times: after a major contract award or a wave of customer FIDs, during an energy/resources capex up-cycle with rising commodity prices, and when the engineering-services peer group is trending with ADX > 25. Avoid: 3 days before results, when interest rates are rising sharply, during capex deferrals/project cancellations, and during global risk-off periods.

Only take momentum entries when ADX > 25 (confirms a trending market). If ADX < 20, the market is ranging - EMA crossovers will give false signals. Watch ADX direction too: rising ADX = strengthening trend (stay in), falling ADX = weakening trend (prepare for exit). ADX > 50 may indicate trend exhaustion - be cautious.

Initial entry: 100% of the planned base position. After 1x ATR profit AND a first pullback to the 20 EMA: add 50% (now 150%). Move the original stop to breakeven before adding. Each addition has its own stop. Maximum position: 150% of base. This way you're only risking profits on additions, not original capital.

Large contract wins and customer final investment decisions (FIDs) in LNG, gas, power and mining lift Worley's backlog and confirm its growth outlook - the biggest catalysts for the stock. Avoid positioning into binary project-decision risk, but post-announcement, if the trend confirms, momentum setups have strong catalyst support.

ITM calls (delta 0.65-0.75) for confirmed trends give good delta participation. Bull call spreads (buy ATM, sell at resistance) define risk and target for moderate conviction. Use 20-30 DTE minimum. If IV is elevated (post-announcement), spreads protect against IV crush. Always check ETO liquidity on this mid-cap - CFDs or shares are practical alternatives.

Watch the engineering/resources-services peer group rather than just XEJ (which is producer-dominated). Peers: Monadelphous, Seven Group, Downer, NRW - at least 2 of 4 above 50 EMA and uptrending. Calculate Worley relative strength vs the ASX 200 (should be positive). Cross-asset: copper above 50-day MA, oil & gas firm, global services peers (SLB) positive. Score 3+ of these for strong confirmation.

Optimise parameters (EMA periods, ADX threshold) with walk-forward testing over 5+ years including different capex cycles. Create a composite score (0-10) from EMA alignment, MACD, ADX, volume, sector and relative strength. Classify the regime (trending/ranging). Backtest by score bucket. Trade only Score 6+. Illustrative target: win rate > 50%, profit factor > 1.8.

Direct: energy/engineering-services peers (Monadelphous, Seven Group, Downer), oil & gas prices, copper and iron ore. Global: oil-services peers (SLB, Jacobs) and the OIH ETF, plus broad capex reads (PAVE, Caterpillar). Macro: RBA/US Fed rate trajectory and global risk sentiment. Build a cross-asset score - 4-5/5 = maximum conviction, <3 = reduced size. Copper and oil are particularly useful leading indicators.

High-importance features typically: peer breadth (sector confirmation), ADX (trend strength), relative volume and relative strength. These capture the key factors traditional analysis also values. Feature-importance monitoring helps refine the model and provides insight for manual trading. Retrain quarterly as relationships evolve.

Delta 0.70-0.80 for strong momentum (Score 8+), 0.55-0.65 for moderate. Worley moves are trend-driven, so gamma is less critical. Use 20-25 DTE minimum, roll before <10 DTE. Monitor IV percentile: post-catalyst IV may be elevated - use spreads. Calm trending periods have lower IV - naked options are more efficient. Confirm ETO liquidity before committing.

Base allocation 6-8%, maximum 10% during strong themes. Energy/capex-cyclical sector limit 15%. Manage correlation with other capex-levered cyclicals (peers, miners add exposure). Reserve capital for pyramiding. Strategy drawdown limit -12% - pause if breached. Track separately, compare to a buy-and-hold benchmark. Options improve capital efficiency where liquidity allows.