Buy Alert: 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:
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
