Weekly Update: February 25, 2015
Weekly Update: February 25, 2015
Big Picture Outlook:
Some interesting news from the oil patch this morning…
According to the EIA, US crude stockpiles grew by an astonishing 8.4 million barrels for the week of February 20th. This is the 5th straight week that US crude inventories have achieved new 80-year highs.
Without question, the US is sitting on an abundant crude inventory.
But here’s the deal…
The price of WTI didn’t collapse on the news. In fact, the commodity is trading $0.60 higher on the day as I write.
What’s the big deal about that?
When a deeply oversold market fails to drop on bearish news, it’s a good sign that a bottom is near.
And that’s not all…
Saudi Arabia’s oil minister, Ali al-Naimi, spoke with the press today. The controversial leader of OPEC production strategy said, “global demand is growing and markets are calm.”
While it may not sound like much of a statement, some energy analysts view it as an attempt to bring bulls back into the oil market.
What’s the takeaway from all this information?
Despite surging inventories, it’s starting to look like a crude oil bottom is very near. While we may see another test of the recent lows near $45 a barrel, a drop into the $30 range is looking very unlikely at this point.
Let’s get to this week’s updates…
Portfolio Highlights:
Editor’s Note: I won’t update every open position every update. I focus on the positions with significant news or price movement.
. . . . Penn Virginia (PVA) March 20, 2015 $8 calls
Trading in PVA has been a bit dull ever since the company announced drastically reduced 2015 capex spending last week. The oil and gas explorer is trading just over $6 a share as I write.
With expiration just a few weeks away for these $8 calls, we need bulls to return to this name soon. Since the company is reporting Q4 earnings after the closing bell today, we may get exactly what we need!
Keep holding these calls through tonight’s earnings. Our profit targets are at $9.50 and $11.00, while our risk control line is at $5.50.
. . . . WPX Energy (WPX) May 15, 2015 $12.50 calls
WPX is giving back some of its early February gains in recent trading. The oil and gas producer dropped below $12 this week in low volume trading.
While I’m not overly concerned about the recent price action, WPX is reporting Q4 earnings after the closing bell today.
As you’re likely aware, earnings results always have the potential to move a stock in a big way. If WPX management gives investors a promising outlook, we could see shares rise dramatically in coming sessions.
Remember, we upped the risk control line to $11.20 in this trade a few weeks ago. Our profit targets remain at $16.00 and $18.00.
Until next time,
Justin Bennett
***Editor’s Note*** Be on the lookout for another trade alert in your email inbox by the weekend!
Category: Commodity Trading
