Weekly Update: March 26, 2014
Weekly Update: March 26, 2014
Big Picture Outlook:
This morning’s EIA inventory report revealed crude inventories rose by 6.6 million barrels for the week of March 21st. That’s a rather large build, which is consistent with the ongoing refinery maintenance season.
However, gasoline inventories fell by a steep 5.1 million barrels. With refineries running at 86% capacity, it makes perfect sense to see the steep draw.
What’s this data really mean?
We’ll likely see a few more weeks of crude inventory builds. But with steep declines in gasoline inventories, refiners will have to ramp up production again soon. As a result, crude supplies are likely nearing a seasonal apex and prices may start firming from here.
Let’s get to our open positions…
Portfolio Recap:
. . . . Encana (ECA) July 18, 2014 $19.00 Calls
As I write, ECA shares are crossing the tape at $20.76. That’s a new 52-week high! What’s more, we’re within a whisker of our first profit target at $21.00. If you’re a conservative investor, consider taking a profit on this call position when ECA hits that level.
However, if you’re more aggressive, keep the ECA call position OPEN. We still have plenty of time for shares to rise to our second profit target at $22.00!
. . . . Oasis Petroleum (OAS) April 17, 2014 $45.00 Calls
Unfortunately, OAS is turning out to be a dud. Shares of the company have been stuck at the $41.00 area for nearly two weeks.
There’s still a chance we get a nice bounce to get back in the green with our OAS calls. But with April expiration approaching, shares will have to start rebounding very soon.
Only aggressive investors should consider holding OAS for a bounce back to higher prices.
. . . . Barrick Gold (ABX) May 16, 2014 $21.00 Calls
The recent downdraft in the price of gold is not sitting well with ABX investors. Shares are trading down to $17.92 in today’s session, which is a whisker away from our risk control line at $17.90. If ABX trades below that level, conservative investors may want to close this trade to reduce risk. If you’re more aggressive, consider holding ABX for a bounce.
. . . . Freeport McMoran (FCX) May 16, 2014 $31.00 Puts
FCX caught a bid in recent trading thanks to a rebound in copper prices. Investors pushed shares to the $32.25 area on hopes the recent copper plunge was a peculiar one-time event.
However, it’s still too early to know if it is or not. Recent Chinese economic data is coming in well below expectations, and that’s bad news for copper.
We’re slightly under water on this trade, but let’s keep holding our FCX $31 puts for a bit longer. Just remember, the risk control line is at $33.50. If FCX rises above that level, conservative investors may want to close this trade to control risk.
. . . . Abraxas Petroleum (AXAS) June 20, 2014 $2.50 Calls
AXAS is holding onto its recent gains quite nicely. In fact, shares only made one small dip back below $4.00 on Monday.
However, given the hefty bullish run over the past few weeks, we’ll likely see AXAS take a breather for a while. But that’s OK! We have plenty of time remaining on these calls.
Speaking of which, our June $2.50 calls traded at $1.65 yesterday and today… a 43% gain from our entry.
Keep holding AXAS for higher prices!
. . . . Conoco Phillips (COP) May 16, 2014 $67.50 Calls
Our COP call trade started out a bit wobbly. Shares whipsawed around the $68.00 area for most of the last week.
But today is a different story…
COP broke to a new multi-month high near $69.00. This morning’s rally had our $67.50 calls trading at $2.50 a contract- a 30% gain from our entry of $1.92.
What’s more, there was additional large block call buying in the name again this morning. That’s always a great sign!
Let’s hang on to our COP calls for bigger gains. The stock is performing well relative to the broad markets and we have plenty of time until expiration.
. . . . BP Amoco (BP) May 16, 2014 $47.00 Calls
Our most recent trade is getting a nice boost today. As I write, BP is trading at $47.30 and looking for additional upside. Thanks to this morning’s bounce, our BP calls jumped to a high price of $1.43… a 43% gain from our official entry of $1.00.
Remember, the risk control line for this trade is $46.20, while the first profit target is at $48.50.
Keep holding the BP calls for additional upside!
Category: Commodity Trading
