Buy Alert: March 31, 2015
Buy Alert: March 31, 2015
Option Strategy:
Buy Oneok Inc. $OKE July 17, 2015 $50.00 calls for $2.90 or better.
Commodity Outlook: Natural Gas
Unfortunately, it was a very uninspiring winter for natural gas. The commodity sank to new multi-year lows at $2.60 mmBtu despite a brutally cold Eastern US winter.
Not surprisingly, trading in natural gas producers has been rather ambivalent the past few months. Investors simply aren’t willing to bid most producers up without natural gas at least showing a bottom is near.
Despite this, there’s one natural gas related company that’s really catching my eye right now.
It’s a pipeline and storage provider that’s showing a very promising technical pattern.
A pattern that will likely lead to big gains in coming months…
Resource Company: Oneok Inc. $OKE
In case you’re unaware, $OKE is a top-tier natural gas gatherer, processor, and transporter. The $10 billion market cap company has expansive operations in the Mid-Continent and Rocky Mountain regions.
It’s very important to note that $OKE is the general partner to Oneok Partners L.P. $OKS. Be careful not to confuse the two.
We’re interested in $OKE today…
Why?
Not only are shares of the company rallying nicely off the 52-week low set in January, a promising bullish technical pattern is developing.
Now before I show you the pattern, here are the options we’re interested in…
Buy the $OKE July 17, 2015 $50.00 calls for $2.90 or better.
The current bid/ask spread for this contract is $2.60/$2.70.
Do not pay more than $2.90!
Our official entry price for performance tracking is $2.70. Your price may be higher or lower.
Exit Strategy:
As you can see, $OKE is trading in a tightening range in the $47 to $48.50 area (blue lines). Professional traders call this an “ascending triangle” or “continuation” pattern.
Given this technical situation, we have strong odds that another rally is coming for $OKE.
Remember, we want $OKE to trade higher. Our first profit target is $52 while our second target is at $56.
Of course, there’s always the possibility the pattern fails. That’s why we have a risk control line at $45.90. If $OKE trades below that level, conservative investors should consider closing this trade to preserve capital.
Category: Commodity Trading
