Buy Alert: November 3, 2015
Buy Alert: November 3, 2015
Option Strategy:
Buy ConocoPhilips $COP January 15, 2016 $57.50 calls for $2.60 or better.
Commodity Outlook: Crude Oil
I’m seeing something very interesting…
Despite the fact WTI crude is still range bound in the mid-$40 a barrel range, a number of leading energy companies are surging to new multi-month highs.
Exxon Mobil $XOM, Pioneer Resources $PXD, Chevron $CVX– they’re all seeing remarkable strength in recent trading.
This strong price action in energy names leads me to believe that while crude oil may not rally strongly any time soon, the commodity’s darkest days are behind it.
How can we capitalize on this situation?
Let’s look to oversold oil companies that have already reported Q3 earnings and are breaking above important technical resistance areas.
The company below is doing just that…
Resource Trade: ConocoPhillips $COP
As you may know, $COP recently reported Q3 earnings that were decidedly poor. The company lost $0.08 per share in the quarter, a sharp contrast to the $2.17 a share in earnings it made in the same period a year ago.
But here’s the deal…
$COP has been rallying strongly ever since it reported in late October.
How can that be?
Here’s my take…
Investors are convinced the worst of the industry downturn has already been priced into $COP shares. As a result, they’re jumping in the high dividend paying issue while it’s still relatively cheap.
So here’s what we’ll do…
Buy the $COP January 15, 2016 $57.50 calls for $2.60 or better.
The current bid/ask spread for this contract is $2.38/$2.45.
Do not pay more than $2.60!
Our official entry price for performance tracking is $2.45. Your price may be higher or lower.
Exit Strategy:
As you can see, $COP is breaking above (green circle) the downtrend line from the 2014 highs (blue line) this week. This is a very important development.
The technical action alone has the potential to send $COP sharply higher in coming months.
Remember, we want $COP to trade higher. Our first profit target is $60.00 while our second target is at $65.00.
Our risk control line is just below the recent breakout point at $53.90. If $COP trades below that level, conservative investors should consider closing this trade to preserve capital.
Category: Commodity Trading
