Weekly Update: July 16, 2014

| July 16, 2014

Weekly Update: July 16, 2014

 

Big Picture Outlook:

After a swift downturn to the $100 a barrel level, WTI crude is bouncing nicely in today’s session. In fact, the essential commodity is back above $101 as I write.

What has crude cruising higher?

This morning’s EIA inventory report revealed a steep 7.5 million barrel draw. That’s the biggest storage downturn since early January and points to strong underlying strength in the US economy.

Given this bullish information, along with the oversold nature of the crude complex, there’s strong potential for additional WTI upside in coming days.

What about precious metals?

After toying with the $1,350 level a few days ago, gold is back below $1,300 as I write. A benign inflation outlook from Fed Chairwoman Janet Yellen has investors pulling in the reins on their gold and silver investments.

Let’s get to our open position updates…

 

Portfolio Recap: 

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

Our beloved ECA trade is coming to an end this week. As early subscribers remember, this Canadian oil producer hit both our profit targets and gave us a max gain of 264%.

No doubt about it, you made solid profits on this one…

But now it’s time to close this trade. Expiration is this Friday. If you don’t exit this position by the close that day, you’ll own ECA at $19 a share on Monday.

Congratulations on a great trade!

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

In spite of all the recent market volatility, SE is still on a steady march to higher prices. The pipeline operator is currently trading at $42.67, which is just shy of the 52-week high of $42.90 set a few days ago.

And listen to this…

Another round of very bullish option activity came into SE a few days ago. Traders were betting on the SE September $45 and $46 calls with reckless abandon. As you know, when we see unusual options activity, it’s a good tell for future price direction.

It goes without saying that you should keep holding of your SE calls for higher prices!

Remember, our first profit target at $42 has already triggered. That means conservative investors may have already taken some profits off the table. However, aggressive traders should hold these calls for our second profit target at $44.

. . . . PetroQuest Energy (PQ) July 18, 2014 $6 Calls

Here’s another trade we’ll have to close by Friday. As you’re likely aware, PQ succumbed to the downturn in crude oil prices over the past few weeks. Unfortunately, PQ missed our second profit target by a mere 18 cents. However, our first target was met and PQ gave us a max gain of 166%.

Congratulation on another great trade!

. . . . Boardwalk Pipeline Partners (BWP) Sept. 19, 2014 $16 Calls

Yet another week of uneventful trading action for BWP…

The pipeline operator seems content with trading in the $18 range for the time being. However, we still have plenty of time left with our calls, so just keep holding BWP for our profit targets at $20 and $24.

. . . . Petroleo Brasileiro (PBR) July 18, 2014 $16 Calls

This one’s coming down to the wire…

PBR is putting in a great last-ditch effort to break above $16. As you may remember, this price level has turned the Brazilian producer lower twice over the past few months.

As I mentioned last week, we’ll need a rally to $16.52 ($16 strike + $0.52 premium paid) by Friday’s close to get our calls back to breakeven. Given the recent strength in the name, we still have good odds of PBR doing just that.

Now, whether you want to take the chance of PBR rallying further by Friday is up to you.

Just remember…

If PBR closes above $16.00 (our strike price) this Friday, and you don’t close this position, you’ll own shares come Monday morning.

. . . . Cabot Oil & Gas (COG) July 18, 2014 $37.50 Calls

No doubt about it… COG has been a total dud since we opened this trade in late May. As a result, our options are worthless and we’re chalking this trade up as a loser.

Remember, try as I may, I will not be able to make every trade in this service a winner. Anyone claiming a 100% win rate dealing with stocks and commodities is full of hot air.

That’s why you need to use appropriate position sizing techniques with every trade you make!

. . . . Halcon Resources (HK) October 17, 2014 $7 Calls

After correcting to the 200-day moving average, HK is back on the upswing today. In fact, the small-cap operator is up nearly 5% as I write.

Remember, this is a trade on HK’s Tuscaloosa Marine Shale well results, which should be hitting the wires in the next few weeks.

And keep in mind, HK hit our first profit target of $7.50 on July 2nd. As a result, only aggressive investors should be holding HK for higher prices.

. . . . Triangle Petroleum (TPLM) October 17, 2014 $10 Calls

Maybe you heard the big news…

Whiting Petroleum (WLL) bought its smaller competitor, Kodiak Oil & Gas (KOG), in a $6 billion deal last weekend. Since TPLM is another pure-play Bakken producer like KOG, investors are piling back into the name in hopes of catching the next Bakken buyout. In fact, TPLM closed up by 5% in today’s session.

While a buyout would certainly be nice, TPLM deserves to trade at a higher price point simply because it is a well-run oil producer in a prime location.

Remember, we’ve already achieved our first profit target of $12 in TPLM. That means only aggressive investors should be holding for higher prices.

. . . . CenterPoint Energy (CNP) August 15, 2014 $25 Calls

Unfortunately, CNP is still stuck in a tight range around the $25 area.   With expiration just a few weeks away, we need a hefty bullish move out of this name.

But listen to this…

Analysts at Credit Suisse reiterated their “outperform” rating and $29 price target on CNP just a few days ago. That means our first profit target at $28 is definitely within reach.

And keep in mind, even though CNP has yet to hit our price targets, our call contracts have already run to a 100% gain in recent trading.

. . . . Hecla Mining (HL) September 19, 2014 $3.50 Calls

Obviously this week’s downturn in the price of silver is not what we want to see. However, it’s important to note that the lustrous metal has strong technical support at the $20.25 area. That means we could see a bounce out of silver and HL soon.

Keep holding these calls for higher prices. Our profit targets are $4 and $5.50.

. . . . Pan American Silver (PAAS) October 17, 2014 $16 Calls

PAAS jumped to the $16 area on July 10th. The short-lived rally sent our calls up to $1.00 a contract- a 17% gain from our entry. Obviously, we want way more than 17% out of this trade, so let’s keep holding these calls for higher prices in the months to come.

Our targets are at $17 and $20.

. . . . SandRidge Energy (SD) December 19, 2014 $7 Calls

Unfortunately, the sharp downturn in WTI took SD below the important technical support line I mentioned in the trade alert. As a result, our $6.60 risk control line has triggered. If you’re a conservative investor, you may want to close this trade to conserve capital.

But before you do, listen closely…

Billionaire investor, Leon Cooperman, just announced SD is one of his top stocks picks for 2014. Upon hearing the news, investors are jumping back into SD, driving it up 4% in today’s session.

What’s more, we have an enormous amount of time left in these contracts. So don’t be afraid to hold onto your SD calls for higher prices.

. . . . Southwestern Energy (SWN) September 19, 2014 $43 Calls

Our pick from earlier today is already flirting with our maximum buy-up-to- price of $1.95 per contract. If you haven’t already, go ahead and purchase these contracts for a potential bounce in the price of natural gas.

Until next time,

Justin Bennett

Remember, if you’d like to comment on how you’re doing in the service, or if you have any questions or concerns, please feel free to drop me an email at [email protected] . I’d like to know how you’re doing!

Category: Commodity Trading

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.