Buy Alert: March 3, 2014
Buy Alert: March 3, 2014
Option Strategies:
Buy Encana (ECA) July 18, 2014 $19.00 calls for $1.75 or better.
Buy Oasis Petroleum (OAS) April 17, 2014 $45.00 calls for $2.20 or better.
Commodity Outlook: Crude Oil
West Texas Intermediate (WTI) crude has been holding above $100 a barrel for nearly three weeks now. And with Ukrainian situation going from bad to worse this past weekend, the commodity is pushing above $104.
As you may know, when oil rallies over $100, companies producing the commodity get an extra revenue boost. And as long as they keep costs under control, higher oil prices typically translate into better earnings.
As a result, when we see the price of crude making a sustained run higher, it’s a great idea to look to oil companies for profits.
Here are two companies set to outperform in the months to come…
Resource Company #1: Encana (ECA)
Encana is a North American oil producer with exposure to the DJ Basin of Colorado, San Juan of New Mexico, and Tuscaloosa Marine Shale of Louisiana.
ECA has been trading between $19.40 and $17.20 for the past few months. But thanks to the recent advance in oil, shares of this oil explorer are poised to break higher.
Let’s buy the ECA July 18, 2014 $19.00 calls for $1.75 or better.
The current bid/ask spread for this contract is $1.50/$1.55.
Pay no more than $1.75 per contract!
Our official entry price for performance tracking is $1.55. Your price may be higher or lower.
Exit Strategy:
Remember, we want ECA to trade higher. Our first profit target is the $21.00 resistance area. We could see additional gains for ECA if WTI crude stays above the $100 a barrel area for a sustained period. In such a scenario, ECA may jump to our second profit target at $22.00.
The risk control price is $18.25. If ECA trades below that level, conservative investors should consider closing this trade to conserve capital.
Resource Company #2 : Oasis Petroleum (OAS)
Here’s another oil producer that’s poised to pop. Oasis Petroleum operates in the prolific Bakken Shale of North Dakota. The company recently reported solid earnings and now investors are ready to take the shares higher.
Don’t delay in buying the OAS April 17, 2014 $45.00 calls for $2.20 or better.
The current bid/ask spread for this contract is $1.80/$2.10.
Do not pay more than $2.20 per contract!
Our official entry price for performance tracking is $2.10. Your price may be higher or lower.
Exit Strategy:
Remember, we want OAS to trade higher. Our first profit target is the $47.50 resistance area. Much like our first trade in ECA, we could see additional gains for OAS if oil holds above $100 a barrel for an extended period. In such a scenario, OAS may jump to our second profit target at $50.00.
The risk control price for this trade is $40.90. If OAS trades below that level, conservative investors should consider closing this trade to conserve capital.
Category: Commodity Trading
