Weekly Update: July 9, 2014

| July 9, 2014

Weekly Update: July 9, 2014

 

Big Picture Outlook:

This morning’s EIA oil inventory report revealed a 2.4 million barrel decrease in US oil stocks for the week of July 4th. While a decline in oil supply is generally considered bullish, this week’s report has a hidden bearish tone.

You see, even though inventories fell last week, US oil storage levels are still abnormally high for this time of year. In fact, at 382.6 million barrels, current US oil supply is well above the upper limit of the average range for this time of year.

And since we’re in the peak of the summer driving season where demand for oil is the highest, we should be seeing bigger weekly inventory drawdowns.

Oil is reacting to the news by falling $1.21 a barrel on the day. The commodity is now trading at $102.20, which is the essential technical support I mentioned in yesterday’s trade alert.

If oil is going to bounce, now is the time it will do it. But if it breaks below this important support area, we may see the commodity test $100 in the near future.

Let’s get to our open position updates…

 

Portfolio Recap:

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

ECA continued lower this week. However, with shares trading at $22.50 technical support, we may see a bounce before expiration of our call contracts next Friday.

Remember, since both our profit targets have already triggered in this trade. Only aggressive investors should be holding these calls for higher prices.

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

After a relatively slow week, SE is jumping back above $42.50 in today’s session. This afternoon’s rally has our calls trading up to $3.60 a contract- a gain of 200% from our entry of $1.20.

Remember, our first profit target at $42 has already triggered. So if you’re a conservative investor, be sure to take some profits off the table. Aggressive traders may want to hold these calls for our second profit target at $44.

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

PQ missed our $8 profit target of by a mere 25 cents last week. Given the fact expiration for these contracts is next week, there’s a good chance we’ve seen the maximum gains in our PQ calls. After all, the small-cap oiler is trading about 65 cents lower than it was a few days ago.

As a result, you may want to consider closing this trade for a nice profit while you still can. Our calls are still trading for around a 100% gain from our entry.

And keep in mind, PQ is still trading above our first profit target of $7.

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

No doubt about it, BWP trades in fits and starts. One week the pipeline operator sees a flurry of activity and the next it’s as quiet as a mouse.

But don’t let that sway you…

It’s in our best interests to stay patient with this name. The stock is still in a strong technical uptrend from the lows set in early March. What’s more, we’re still sitting on a respectable 60% profit in our call position.

And remember, we have plenty of time until expiration. Keep holding for our profit targets at $20 and $24.

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

PBR is up nearly 4% in today’s session. While the rally is nice, it may be coming too late. As I mentioned last week, we’ll need a rally to $16.52 ($16 strike + $0.52 premium paid) by July 18th to get our calls back to breakeven.

If you’re up to it, keep holding your calls through to next week’s expiration. Today’s rally may be the start of something good!

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

COG is still showing signs of life around the $34.50 area. However, we’ll need a strong rally to $38.55 ($37.50 strike + $1.05 premium paid) by July 18th to get this trade firmly in the green.

Remember, our risk control line has already triggered in this trade. As a result, only aggressive traders should be holding these calls for a rebound.

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

HK gave up a bit of ground last week as the price of oil fell. However, the small cap oil explorer is recovering nicely in today’s session. We have plenty of time until expiration, so let’s be patient with this trade.

And just so there isn’t any confusion…

Upon closer review, HK hit our first profit target of $7.50 last Wednesday. So if you took a profit at that level, congratulations on doing so. If you didn’t, don’t worry. We’ll likely get another shot at higher prices for HK.

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

TPLM is working its way back towards $12 after succumbing to a nasty, yet short-lived selloff to $10.70 yesterday. Since we have plenty of time left until expiration, let’s be patient and see if TPLM can get to our second profit target at $14 by October.

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

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

Unfortunately, CNP succumbed to a swift bout of selling last week. The energy provider is currently trading just shy of our strike price at $25.

Obviously, we’ll need to see a rally out of this name over the next two months to get our calls back into a strongly profitable position like they were at the end of June.

Our profit targets are at $28 and $35.

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

HL is still working on that technical breakout I spoke of last week. The silver miner closed up by 3.2% today, which puts it near last week’s high of $3.50. A pop beyond that level and things will really get interesting for HL!

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 is breaking above $15.50 on good volume in today’s session. That means we could be on the verge of a substantial move higher for this international silver producer!

Remember, we have plenty of time left in PAAS, so keep holding for higher prices! Our targets are at $17 and $20.

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

Our most recent pick is still sitting around our entry. If you haven’t already, go ahead and pick up the December 19, 2014 $7 calls at any price under $0.75.

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.