Weekly Update: June 11, 2014

| June 11, 2014

Weekly Update: June 11, 2014

 

Big Picture Outlook:

It’s an uncertain day on Wall Street. As I write, all the major indexes are deeply in the red. The DOW is down 121 points (0.72%) while the S&P 500 is off by 10 points (0.54%).

Every industry ETF on my watch list is trading lower.

…except for oil and gas!

That’s right, both the Energy Select SPDR (XLE) and iShares US Oil & Gas (IEO) are solidly green on the day. So is the SPDR Oil & Gas Exploration (XOP).

In case you’re unaware, these ETFs are a great way to track energy investors’ sentiment relative to the broad market. If you don’t have those tickers in your watch list, I suggest you add them today.

What does today’s outperformance in energy producing companies tell us?

Investors are positioning their portfolios for additional gains in energy names this Summer. With oil jumping back to $105 a barrel this week, there’s a very good chance of a break to higher prices in coming weeks.

Personally, I wouldn’t be a bit surprised to see oil trading at $108 or higher by the end of July.

And that’s precisely why we’re sticking with our bullish thesis in oil and gas names for the foreseeable future.

Just remember, at some point this bullish cycle will come to and end. And when it does, we’ll start buying puts in energy names. But for now, it’s best to swim with the current and be long this industry!

Let’s get to our open positions…

 

Portfolio Recap:

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

ECA is on the verge of another bullish breakout. Shares of the Canadian producer are pushing $24.00 in today’s session. Our July $19 calls are showing just over a 200% gain, but we’ll likely see additional gains for these contracts in coming weeks.

Remember, both our profit targets have already triggered in this trade. That’s why only aggressive investors should be holding a few of their original call contracts for higher prices!

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

There’s the bounce we were looking for last week. AXAS rallied to the $5.40 area on Monday after an analyst upgrade from Suntrust. If you’re still holding a few of these calls, go ahead and swing for the fences. Keep holding until expiration, which is just 7 trading days away.

Remember, both our AXAS profit targets have already triggered. As a result, only aggressive investors should be holding a small portion of their original call position for further gains.

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

Since the rally over $30 last week, GDP has been stuck in a range around $28. Like AXAS, expiration for these contracts is the end of next week. If you still have a few of these calls, consider holding until then.

Remember, both our profit targets have already been hit and we’ve collected massive gains in GDP. However, there are some aggressive traders who are still holding a few contracts for higher prices.

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

SE came within a stone’s throw of our first profit target at $42 a few days ago. The recent rally had our contracts trading at a peak gain of 139%!

Now keep in mind, we still have plenty of time until expiration in this trade. That’s why I suggest you stick to the game plan and hold these calls for our profit targets of $42 and $44.

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

I love it! CLF is a total dog. Shares of the industrial metal miner sunk to $14.25 in recent trading. The recent downdraft has our June $17 puts up to $2.74 per contract – a 204% gain.

Remember, both our profit targets have triggered in this trade. Only aggressive traders should consider holding a few of their original puts until expiration next week!

. . . . PDC Energy (PDCE) June 20, 2014 $70 Calls

Good news and bad news for PDCE…

First, the good news. Shares are breaking to multi-month highs above $65 in today’s session.

Now the bad news…

With expiration coming next week, most of the time value has deflated from our call contracts. To get this trade in the green, we’ll need a massive rally over the next 7 trading days.

Remember, only aggressive traders should be holding our PDCE calls for higher prices.

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

PQ is making a solid break to higher prices. The small-cap producer is rising above $6.30 today after trading at $5.80 last week. We’ll need a solid run above multi-month highs at $6.50 to really get our call contracts in the green.

Remember, our price targets in this trade are at $7.00 and $8.00.

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

BWP is still stuck in a sideways trading pattern at the $17 area. But since we have plenty of time until expiration, I’m not too concerned.

Let’s keep holding this pipeline provider for higher prices in the months to come. Our profit targets are at $20 and $24.

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

Good news!

PBR avoided our risk control line at $13.50 last week and is putting in a strong performance this week. Shares of the Brazilian oil producer are back at the $15.75 area, which is the high set a few weeks ago. A break above this resistance level and things will really heat up for PBR!

Remember, our profit targets are at $17.50 and $19.00.

. . . . Cabot Oil & Gas (COG) July 18, 2014 $16 Calls

Unfortunately, COG tagged our risk control line at $34.85 yesterday. If you’re a conservative investor, you should consider closing this trade to conserve capital. If you’re more aggressive, consider holding your COG calls for a rebound in coming weeks.

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

Like most oil and gas names, HK is having a strong day. Shares of the small-cap oiler are pushing $6.40 as I write. A break above Monday’s high at $6.60 will put our $7 calls firmly in the green.

And listen to this…

HK just announced they received $400 million in funding for the Tuscaloosa Marine Shale (TMS) development. What’s more, the company is completing the Black Stone 4H-2 well this month. That’s means we should see well results in mid to late July.

This could be a very big trade folks. Keep holding our HK $7 calls for higher prices!

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

We purchased our TPLM calls at just the right time. Analysts at multiple Wall Street firms upgraded TPLM shares this morning. Wunderlich sees shares trading up to $14 while Canaccord Genuity sees them rallying to $13.

And the best part is, we have plenty of time in this trade. So just sit back, relax, and wait for our profit targets at $12 and $14!

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 a line at [email protected].

 

Category: Commodity Trading