Weekly Update: April 16, 2014

| April 16, 2014

Weekly Update: April 16, 2014


Big Picture Outlook:

Amidst all the broad market uncertainty this past week, oil remained on a steady upswing to higher prices.

However, this morning’s EIA inventory report revealed US supplies of the commodity surged by 10 million barrels last week.  The additions pushed inventories to multi-month highs at 394 million barrels.

Given the slightly bearish EIA report, we may see oil bulls take a breather.  Unless the situation in Ukraine goes haywire in the near future, we’re likely close to a mid-term top in WTI.

We have a lot to cover today, so let’s get to our open positions!


Portfolio Recap:

 . . . . Encana (ECA) July 18, 2014 $19.00 Calls

ECA is the gift that keeps on giving…

Shares set a new 52-week high just north of $23.00 today.  That has our July $19 calls running to a new high of $4.30 per contract… a 177% gain from our entry price of $1.55.  Remember, both profit targets have already triggered in this trade so any gains beyond this point is gravy. 

Aggressive investors should keep holding for higher prices!

. . . . Oasis Petroleum (OAS) April 17, 2014 $45.00 Calls

OAS is finally acting like a champ.  Shares are surging to multi-month highs over $47. 

The only problem is we’re out of time… 

These calls expire tomorrow.  And since the recent surge has pushed them back in the money, you’ll have to sell them by the close of Thursday’s trading session.  If you don’t sell by then, you’ll own shares of OAS on Monday morning!

. . . . Barrick Gold (ABX) May 16, 2014 $21.00 Calls

Unfortunately, Barrick is weakening thanks to yesterday’s downdraft in gold.  As I write, shares of the gold producer are trading hands at $18.35.  Obviously we need ABX to pick itself up and get on the move to higher prices.  But given investors ambivalent attitude towards gold right now, the odds are stacked against us.

Remember, the risk control line has been triggered. As a result, only aggressive investors should remain in these calls.

. . . . Freeport McMoran (FCX) May 16, 2014 $31.00 Puts

FCX is stuck in a choppy holding pattern near $33.00.  Obviously since we own puts, we need this name to move swiftly lower.  Let’s be patient, we just might get the move we’re looking for.

However, since the risk-control line has been triggered, only aggressive investors should remain in this trade.

. . . . Abraxas Petroleum (AXAS) June 20, 2014 $2.50 Calls


AXAS hit our second profit target of $5.00 today.  As a result, our June $2.50 calls are trading at $2.50 a contract.  That gives us a 100% return! Not bad considering the gains came from a pipsqueak oiler like AXAS.

Now listen closely…

This small cap oil explorer is getting some solid drilling results.  As a result, shares may run considerably higher in coming months.  And since our calls don’t expire until June, aggressive investors may want to hold on for even bigger gains!

. . . . Conoco Phillips (COP) May 16, 2014 $67.50 Calls

COP surpassed our second profit target of $72.00 per share yesterday.  As a result, our $67.50 calls have jumped to just over $6.00 a contract.  That’s just north of a 200% gain from our entry!

Don’t be afraid to take some well-deserved profits to the bank in this trade.  But if you’re aggressive, consider holding on to a few calls for higher prices. 

The oil and gas sector is hot right now!

. . . . BP Amoco (BP) May 16, 2014 $47.00 Calls

BP experienced some selling over the past few days.  At one point, shares dropped to the low $47 range as investors feared a broad market correction. 

But shares are back on higher ground today…

As I write, shares are crossing at $48.28.  We have another month left until expiration so let’s see if BP can get to our second profit target of $50.00. 

Remember, the first target has already been achieved in this trade. As a result, conservative investor should have been able to lock in gains of 80-100%.  

Given the rampant bullishness in the oil and gas industry, aggressive investors may want to consider holding these BP calls for higher prices.

. . . . Goodrich Petroleum (GDP) June 20, 2014 $17.50 Calls

Congratulations folks…

We hit a home run with our GDP calls! 

As you know, we entered the June $17.50 calls on April 1st for $1.35 per contract.  But now, thanks to an excellent production update this past Monday, our GDP calls are trading at just over $7.00 a contract… a gain of over 400%!

Since both our profit targets have been triggered ($18 and $20), everyone should consider taking some profits off the table in this trade.  But if you’re more aggressive, you may want to hold onto a portion of this trade.  GDP’s recent press release is extremely promising and will likely send shares much higher in the long run.

And remember, expiration on our contracts doesn’t occur until June 20th!

. . . . Spectra Energy (SE) September 19, 2014 $39 Calls

Our SE calls are getting started off on the right foot.  Shares of the US pipeline company are trading just north of $39 as I write.  Keep holding these calls for much higher prices!

. . . . Cliffs Natural Resources (CLF) June 20, 2014 $17 Puts

This morning’s China GDP reading wasn’t as bad as I thought it would be.  Q1 GDP came in at 7.4%, which is above the consensus estimate of 7.3%. 

However, CLF is still dropping like a stone in today’s trading session.  As I write, shares are down nearly 3%. Since we own puts, that’s just what we want to see!

Given the bearish momentum, it’s likely CLF continues lower in coming weeks. 

Keep holding the $17 puts for further gains!


Category: Commodity Trading