Weekly Update: June 25, 2014
Weekly Update: June 25, 2014
Big Picture Outlook:
Oil and natural gas producers took a beating yesterday…
The Energy Select Sector SPDR ETF (XLE) ended the day off 2.1%. At the same time, the SPDR Oil and Gas Exploration and Production ETF (XOP) closed down nearly 4%.
While it wasn’t a great day on Wall Street as a whole yesterday, oil and gas exploration underperformed the market by a large margin. In fact, on a percentage basis, the industry lost more than any other.
That tells me something important…
First of all, investors are getting antsy to take profits on oil stocks. As you know, oil and gas exploration stocks have had a phenomenal run higher over the past few months. If investors see any sign of a potential broad market top, oil stocks may take the brunt of the damage.
Now let me be clear…
I’m not saying the bullish run for this industry has come to a close. However, any broad market downturns will likely be met with outsized selling in oil and gas names.
That’s why we have to be extremely selective trading calls on oil and gas names. If I see more call buying opportunities, you’ll be the first to know. But don’t be surprised if you see some put recommendations coming soon!
Let’s get to our open position updates…
Portfolio Recap:
. . . . Encana (ECA) July 18, 2014 $19.00 Calls
ECA popped to another 52-week high on June 20th! That rally sent our July $19 calls up to $5.65 a contract, which is a gain of just over 260%.
Like I said last week, if you’re still holding a few of these contracts, I would just keep doing so. ECA may have a bit more gas in the tank before expiration in a few 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.
. . . . Spectra Energy (SE) September 19, 2014 $39 Calls
SE shot to new highs at $42.50 in yesterday’s session! That sent our call contracts trading up to $3.50 a contract- a gain of 191%. SE avoided the energy bloodbath since it’s a pipeline provider and not an explorer.
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.
But also keep in mind that we still have plenty of time until expiration. That’s why aggressive traders may want to hold these calls for our second profit target at $44.
. . . . PetroQuest Energy (PQ) July 18, 2014 $6 Calls
Wow- some extreme volatility for PQ the last two days. The small-cap oil explorer was hit hard in yesterday’s industry selloff. However, it regained all the lost ground and more in today’s session.
More importantly, PQ is back above our first profit target at $7.00. That means conservative investors may want to consider taking some profits off the table in this trade.
Our peak gain is 116%, but I think PQ will be trading at $8 by our expiration in July! Aggressive investors should consider holding for further upside.
. . . . Boardwalk Pipeline Partners (BWP) Sept. 19, 2014 $16 Calls
BWP is still lingering around the $17.50 area. However, with the 50-day moving average coming up to support the stock, we may see another round of intense buying soon.
Remember, we have plenty of time until expiration, so just be patient with this pipeline operator.
Our profit targets are at $20 and $24.
. . . . Petroleo Brasileiro (PBR) July 18, 2014 $16 Calls
Shucks…
We were so close to having the breakout we needed in PBR last week. The Brazilian producer was within a few cents of $16.00. A break of that level would have triggered another round of buying.
But thanks to yesterday’s big oil and gas selloff, PBR is back under $15.00. With July just around the corner, this Brazilian producer needs to get in gear fast.
Remember, our profit targets are at $17.50 and $19.00. Our risk control line is at $13.50.
. . . . Cabot Oil & Gas (COG) July 18, 2014 $37.50 Calls
Unfortunately, it’s becoming blatantly obvious COG is stuck in an unforgiving downtrend. The Marcellus Shale producer is slowly bleeding back down to 6-month lows at $32.50.
Remember, our risk control line triggered in this trade a few weeks ago. That means only aggressive traders should be holding these calls for a rebound.
. . . . Halcon Resources (HK) October 17, 2014 $7 Calls
After taking a bit of a dive yesterday, HK is recovering nicely today. In fact, the small-cap oil and gas name is just a few cents away from $7.00.
Remember, we bought this name based on a looming well results catalyst. HK is expected to report its first well results in the Tuscaloosa Marine Shale in July or early August.
With an October expiration, we have plenty of time to see this trade through. Keep holding your HK $7 calls for higher prices. Our profit targets are $7.50 and $10.00.
. . . . Triangle Petroleum (TPLM) October 17, 2014 $10 Calls
TPLM surged above our first profit target at $12.00 on June 23rd. That rally sent our $10 calls up to $2.80 a contract, which is a 107% gain from our entry!
Of course, TPLM took quite a tumble yesterday along with the entire exploration industry. But since the name is jumping back to the $12 area in today’s trading, conservative investors may want to take some profits off the table.
If you’re more aggressive, consider holding TPLM for our second target at $14.00!
. . . . CenterPoint Energy (CNP) August 15, 2014 $25 Calls
In spite of the big selloff in energy names yesterday, CNP is peeking back above multi-week highs at $25.00 this afternoon. Not only is the price action in CNP good, but there are still an abnormally large amount of July and August call contracts being purchased.
That leads me to believe higher prices are coming soon for CNP! Remember, our profit targets are at $28 and $35.
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 CustomerService@CommodityTradingResearch.com.
Category: Commodity Trading
