Buy Alert: March 14, 2014

| March 14, 2014

Buy Alert: March 14, 2014

 

Option Strategy:

Buy Abraxas Petroleum (AXAS) June 20, 2014 $2.50 calls for $1.20 or better.

 

Commodity Outlook: Oil

As you know, WTI crude broke below $100 a barrel earlier this week thanks to numerous factors.  However, there’s a very good chance oil holds in the mid- to high- $90 range for the foreseeable future.  As a result, the recent downdraft in the oil and gas exploration industry has likely run its course.

Here’s an oil producer we need to take a closer look at…

 

Resource Company: Abraxas Petroleum (AXAS)

AXAS is a small-cap oil and gas producer with operations in the Bakken, Powder River Basin, Eagle Ford Shale, and Delaware Basin.  Shares of the company made an abrupt run higher in October and November of last year on news of strong operational performance.

And now, after a few months of consolidation, shares are back on the move.  What’s more, there’s an abnormally large amount of call buying happening in the name.  That means other investors are keen to the opportunity in AXAS!

Now’s the perfect time to add AXAS calls to our portfolio…

Let’s buy the AXAS June 20, 2014 $2.50 calls for $1.20 or better. 

The current bid/ask spread for this contract is $1.00/$1.15. 

Pay no more than $1.20 per contract!

Our official entry price for performance tracking is $1.15. Your price may be higher or lower.

Exit Strategy:

Abraxas Petroleum

Remember, we want AXAS to trade higher.  Our first profit target is the $3.90 technical resistance area.  We could see additional gains for AXAS if the company reveals beneficial drilling results in coming months.  In such a scenario, AXAS may jump above 52-week highs and to our second profit target at $5.00 (not shown on chart).

The risk control price is $3.00.  If AXAS falls below that level, conservative investors should consider closing this trade to conserve capital.

Until next time,

Justin Bennett

 

Category: Commodity Trading