Weekly Update: June 3, 2014

| June 3, 2014

Weekly Update: June 3, 2014

 

*** Editor’s Note*** Due to a publishing break in the latter half of this week, you’re receiving your weekly update a day early. We’ll go back to our regularly scheduled Wednesday updates next week!

 

Big Picture Outlook:

WTI is still experiencing some light selling after its bullish run to $104.50 last week. While some analysts feel crude is ready to tumble below $100 due to record high US inventories, I believe the opposite.

Crude is likely setting up for a summer run to $108 a barrel or higher.

Here’s why…

For starters, as long as US, EU, and Chinese economic data keeps coming in strong, bulls have a good case for higher global prices. With demand getting stronger, it’s unlikely that Brent and WTI drop meaningfully over the next few months. Especially considering the fact that there is still considerable geopolitical pressure in Ukraine and Libya.

But that’s not all…

A new report from the International Energy Agency (IEA) revealed that $40 trillion (yes with a T!) will need to be invested in fossil fuel energy by the year 2035.

The IEA’s report shows just how gargantuan the task is for oil and gas producers to meet burgeoning global demand.

And get this…

Of that $40 trillion, 80% will need to be made to compensate for the decline of existing oil fields. In other words, huge investments must be made just to keep global production stable.

I don’t know about you, but that sounds like a bullish long-term scenario for oil and the companies producing it.

Let’s get to our portfolio update…

 

Portfolio Recap:

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

ECA is inching higher towards the $23.50 technical resistance area. A strong break above this level will likely provide the impetus to push this Canadian oil and gas producer into another bullish run.

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

AXAS is falling back to the up-trending 50-day moving average today. If buyers come back into the small-cap oil producer at this level, we could see a re-test of the $5.50 highs set a few weeks ago.

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

GDP shares surged over $30 in early morning trading yesterday thanks to additional insight on their Tuscaloosa Marine Shale drilling program. The rally sent our June $17.50 calls to $11.50 per contract- a 751% gain from our entry point of $1.35!

And that’s not all…

GDP is receiving multiple analyst upgrades this week. Northland Securities upped their price target to $37 with an outperform rating. Canaccord hiked their GDP price target to $33 from $29.

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.

If you’re one of them, I suggest you keep holding until expiration in a few weeks!

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

SE popped to $41.35 in yesterday’s session, which is another 52-week high. The rally sent our September $39 calls to a bid price of $2.60 per contract. That gave us a 116% gain from our entry!

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

CLF is proving to be the laggard I thought it would be a few weeks ago.

Shares of the industrial metal miner are hitting $15 in today’s session. The recent downdraft has our June $17 puts up to $2.27 per contract today– a 152% gain.

Remember, both our profit targets have triggered in this trade. Only aggressive traders should consider holding a few of their original puts for a further drop in CLF.

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

PDCE is so close to a technical breakout I can taste it! But each time shares rise to the $64 area, sellers tend to bring it back down. We may see a few more days of this seesaw action at technical resistance, but the odds are still good of big break higher in coming weeks.

Remember, we only have a few weeks left in this trade. As a result, only aggressive traders should be holding onto these June $70 calls for a break to higher prices.

Remember, our profit targets are at $70 and $73!

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

PQ is still lingering around the $6 area. However, the uptrend line I showed you in last week’s update is still intact. Let’s keep holding our $6 calls for higher prices.

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

BWP is attempting another run above $18. However, yesterday and today’s price action isn’t quite a strong as I would like to see for a bullish breakout.

As a result, we may see a few more days of choppy trading action before investors carry this name to higher prices. And remember, expiration is still months away so don’t get too antsy with this trade!

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

Unfortunately, PBR broke downwards out of the trading range I mentioned last week. While this sudden downdraft is obviously not what we want to see, there’s still a good chance PBR breaks to new monthly highs above $15.75 by expiration in July.

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 $16 Calls

COG is dropping to the up-trending 50-day moving average today.

Let me show you what I mean…

This important technical level (red line) should provide the bullish support needed to get this oil and gas name kick started to higher prices. Let’s keep holding for a rebound in COG!

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

Our most recent trade has pulled back slightly from our entry. We may see a few more days of price consolidation before HK moves to higher ground. But remember, there are multiple catalysts that could send HK gapping dramatically higher over the next few months.

Keep holding our HK $7 calls for higher prices!

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