Weekly Update: July 23, 2014

| July 23, 2014

Weekly Update: July 23, 2014

 

Big Picture Outlook:

Today’s EIA oil inventory report revealed another hefty draw. For the week of July 18th, crude in storage dropped by 4 million barrels. The last two weeks of big inventory withdrawals have brought US crude supplies down to 371 million barrels- the lowest level since March.

Investors reacted to the news by sending crude up $0.73 to $103.12 a barrel.

What about precious metals?

Gold and silver are still stuck in seesaw patterns at $1,305 and $21 respectively. Consumer Price Index (CPI) readings released early Tuesday morning revealed year-over-year inflation is still hovering around 2.1%.

It’s likely these two metals stay in a holding pattern until investors receive more convincing information in regards to inflation.

And let’s not forget natural gas…

After surging to $6 mmBtu earlier this year, bears are back in complete control of this market. Natural gas dropped below $4 in recent trading and is still struggling to find buyers.

What has this commodity dropping through the floor?

So far, it has been a relatively cool Summer on the East Coast. Temperatures have been at or below seasonal norms for the past few weeks. What’s more, it’s expected to get even cooler over the next 6-10 days.

Since this is a key demand region for natural gas, consumers’ appetite for the commodity hasn’t been all that strong. As a result, weekly EIA storage injections have been exceptionally large for the past month.

As long as cool weather prevails, natural gas may have a hard time finding upside.

Let’s get to our open position updates…

 

Portfolio Recap: 

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

SE set another 52-week high at $43.00 yesterday! The recent gains had our $39 calls trading up to a $3.80 bid, which is a 216% gain from our entry.

We still have plenty of time for SE to reach our second profit target at $44, so keep holding for further upside.

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

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

BWP is back on the move!

The oil and gas pipeline operator surged to $19.65 in yesterday’s session. That has our $16 calls trading up to $3.50 a contract, a 112% gain from our entry.

Remember, our first target is at $20.00, so conservative investors should get ready to take some profits off the table!

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

How about that…

PBR surged to $17.23 before the close last Friday. The late week buying spree sent our $16 calls up to $1.20 a contract- a 130% gain from our entry!

As you’re likely aware, this trade was nearly dead a few weeks ago. However, PBR never hit our risk control line at $13.50 during the time we held these options. As a result, we’re counting this trade as a winner.

Of course, now that expiration has passed, this trade is officially closed.

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

After a rough few weeks, HK is flirting with $7 again. With oil back on the upswing, there’s still plenty of bullish potential here. And don’t forget, HK’s TMS well results should be hitting the wire in the next few weeks.

Keep in mind, HK already hit our first profit target of $7.50. As a result, conservative investors may have already taken profits.

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

This Bakken producer formed a nearly perfect continuation pattern over the past few weeks. As a result, the odds are heavily in our favor for TPLM continuing higher in coming weeks. And the best part is, we still have plenty of time remaining with our $10 calls.

Remember, we’ve already achieved our first profit target of $12. That means conservative investors may have already taken some profits off the table.

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

In spite of all the lofty profit targets set by Wall Street analysts in recent weeks, CNP is stuck in the mud. And the longer it stays at the $25 area, the more our call options lose value.

No doubt about it, CNP needs to get in gear!

Keep in mind, even though CNP has yet to hit our price targets at $28 and $35, our call contracts have already run to a 100% gain in recent trading. That means some traders may have already taken a profit.

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

The recent indecision in the silver market is not helping our HL calls. Even though we have plenty of time left here, HL needs to make some progress. For now, keep holding these calls for higher prices.

Our profit targets are $4 and $5.50.

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

Much like HL, PAAS has been nothing but a choppy mess the past few weeks. Given the current state of indecision in the silver market, it’s likely we see a bit more of this in coming days. However, with strong technical support at $14.75 and $14.00, there’s still a very good chance of higher prices for PAAS.

Keep holding for additional upside.

Our targets are at $17 and $20.

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

Unfortunately, news broke today that Repsol (REPYY) approached Talisman Energy (TLM) looking for a buyout. As you remember, our original thesis in this trade was that Repsol would come bidding for SD.

That doesn’t look like it will happen now.

However, that doesn’t mean this trade is over. SD is still a very promising oil and gas producer, which deserves to trade at a higher price.

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

No doubt about it, the downturn in natural gas prices is not helping SWN. The natural gas producer fell precipitously after last week’s EIA inventory report revealed a bigger than expected build.

However, SWN has yet to hit our risk control line. What’s more, SWN is deeply oversold, which means there’s a very good chance of a rebound in this name soon.

Of course, much of SWN’s price action depends on natural gas. That means we may need to see a bottom in the commodity before SWN can move meaningfully higher.

Regardless, keep holding your SWN calls for a bounce unless it crosses our risk control line at $40.85.

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.