Buy Alert: July 30, 2015

| July 30, 2015

Buy Alert: July 30, 2015


Option Strategy:

Buy Southwestern Energy $SWN September 18, 2015 $21.00 calls for $0.70 or better.


Commodity Outlook: Energy

It was a brutal month for energy names…

With oil falling back below $50 a barrel and natural gas still stuck near multi-year lows around $2.80 mmBtu, exploration and production companies have been taken to the woodshed.

But now I’m noticing signs of a potential bottom…

Energy names were some of the top performers on Tuesday and yesterday.  What’s more, some impressive call buying was seen in select energy names, which tells me a few big money players are betting the bottom is in for the industry.

While I typically like to wait for a confirmed trend change before going long an oversold market, there’s an opportunity in the name below we need to jump on right now…


Resource Trade: Southwestern Energy $SWN

Long time subscribers are familiar with this natural gas industry leader…

We made a trade in the company in April, which came within a whisker of our first profit target at $30 a share.  Our call options ran to a maximum gain of 92% on that trade.

But since that trade, $SWN has tanked.  Shares of the energy producer are down 34% since mid-May.

However, something very interesting happened in $SWN on Tuesday, July 28th

Shares of the company put in a high volume bullish reversal after they hit prices not seen since 2007.  That’s right folks, $SWN is trading at 8 year lows!

But here’s where it gets interesting…

A well-heeled investor bought nearly $600,000 worth of August $20 calls on Tuesday.  Clearly, this trader is betting $SWN won’t drop below those 2007 lows.

Given the fact $SWN is extremely oversold, put in a massive bullish reversal candle, and had bullish options activity, it’s time to make another low-risk bet on the name.

So here’s what we’ll do…

Buy the $SWN September 18, 2015 $21.00 calls for $0.70 or better.

The current bid/ask spread for this contract is $0.51/$0.60.

Do not pay more than $0.70!

Our official entry price for performance tracking is $0.60.  Your price may be higher or lower.

Exit Strategy:

Southwestern Energy

Remember, we want $SWN to trade higher.  Our first profit target is $22.00 while our second target is at $24.00.

Our risk control line is $17.23.  If $SWN trades below that level, conservative investors should consider closing this trade to preserve capital.


Category: Commodity Trading