Weekly Update: May 15, 2014

| May 15, 2014

Weekly Update: May 15, 2014

 

Big Picture Outlook:

Commodities are getting hit hard today. WTI crude is down nearly $1 a barrel while precious metals are giving up much of the gains achieved earlier in the week.

What’s going on?

This morning’s April industrial production report came in at -0.6%.

With industrial production jumping 0.9% in March and 1.1% in February, investors are surprised to see this important data point reverse sharply lower.

What does today’s market upheaval mean for commodities going forward?

Hopefully today’s disappointing data was just an anomaly. If so, we should see commodities regain their footing in the near future as more data comes in.

However, if investors start seeing a new trend of US economic uncertainty, don’t be surprised to see additional downside in both commodities and stocks.

Let’s get to today’s updates…

 

Portfolio Recap:

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

ECA reported some impressive Q1 financial results earlier this week. The Canadian oil and gas producer saw earnings of $0.70 per share, which was well above the analysts’ consensus estimate of $0.53.

As you know, both our profit targets have already triggered in this trade. But since there’s just over two months until expiration, aggressive traders should consider holding a portion of their remaining ECA calls for higher prices!

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

AXAS reported solid quarterly results late last week. The Bakken oil producer brought in $0.05 per share in earnings on revenue of $25.9 million. Shares initially jumped on the news, but investors ultimately used the post-earnings rally as a profit taking opportunity.

Remember, our AXAS profit targets were achieved in March and April. As a result, only aggressive investors have been holding a small portion of this trade for further gains. If you’re still up to it, continue holding these calls until June expiration.

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

Like I mentioned in last week’s update, GDP’s less than stellar earnings report will likely result in a directionless trading for some time to come.

Remember, we’ve already collected massive gains in this trade. At one point, our $17.50 calls ran to an amazing 600% profit. As of today, you can still sell them for $5.90 per contract- a 344% gain from our entry.

GDP may find more upside before June expiration, but only the most aggressive traders should consider holding for it.

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

SE made another run at the $40.00 resistance area yesterday. But thanks to today’s hefty broad market selloff, SE is once again succumbing to short term investor uncertainty.

Like I said in last week’s update, don’t be surprised to see a few weeks of sideways trading action in SE. However, since we have plenty of time until expiration, keep hanging on to these calls for higher prices.

Remember, our profit targets are at $42 and $44.

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

CLF dropped to a new multi-month low at $17.01 last Friday- just what we want to see! Thanks to the selling, our $17 CLF puts moved back into a profitable position.

However, it’s becoming apparent that we’ll need a substantial downdraft in CLF shares to really get our puts showing a respectable profit. We have a month until expiration, so let’s keep holding for our second profit target at $16.00.

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

PDCE is not acting well. Last week’s sub-par earnings results are giving investors the jitters. Shares of the oil and gas producer are once again trading at our $59.00 risk control line in today’s session.

If you’re a conservative investor, you may want to close this trade to conserve capital.

However, more aggressive traders should consider holding onto these June $70 calls for a rebound. Remember, our profit targets are at $70 and $73.

. . . . PetroQuest Energy (PQ) July 16, 2014 $6 Calls

After running to a new 52-week high near $6.60 earlier this week, PQ is back on the defensive. Unfortunately, investors are decreasing risk across the board today as broad market uncertainties prevail.

But let’s not get too worried just yet…

We have until July to see PQ regain its composure and move to higher prices. Our profit targets are at $7.00 and $8.00. Keep holding your PQ calls for higher prices!

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

So far our BWP trade is bit on the dull side. Shares of the pipeline provider are stuck at the $16.00 area.

But don’t let that fool you…

As you know, a well-funded investor made a huge bullish bet in BWP recently. Given the size of this trade, it’s likely we see some unexpected bullish news hit the wires for BWP in coming months. Just sit tight and remember our profit targets at $20 and $24. The risk control line is at $13.90.

Until next time,

Justin Bennett

***Editor’s Note*** Remember, if you’d like to tell me 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