Weekly Update: October 1, 2014

| October 1, 2014

Weekly Update: October 1, 2014

 

Big Picture Outlook:

More carnage on Wall Street today…

As I write, the DOW is down over 230 points and market internals are absolutely abysmal. What’s more, with sellers ruling the roost in the commodity space over the past few weeks, today’s downturn is clearly making matters worse.

Are there any positives out there for commodities?

Once this bout of market fear subsides, investors will find hard assets and many of the companies producing them are drastically oversold.

I’ll be touching more on this theme in coming days as new trade ideas hit your email inbox!

Let’s get to the position updates…

 

Portfolio Recap: 

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

Another week of hefty selling for HK…

Unfortunately, with expiration right around the corner, it’s unlikely this trade recovers. Of course, there’s always the possibility of a news event sending HK shares higher.

Remember, conservative investors already took profits at $7.50 in late June. As a result, only aggressive investors should be holding HK calls for a potential rebound.

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

Like most stocks, TPLM lost ground in today’s session. The Bakken producer sank to the bottom of its multi-month trading range near $10. However, when you compare the price action of TPLM to other Bakken names, it’s holding up quite well.

If you’re aggressive, keep holding your $10 calls for a potential rebound by expiration in a few weeks. Keep in mind, conservative investors already collected profits at our $12 target.

. . . . SandRidge Energy (SD) December 19, 2014 $7 Calls.

The Mississippian producer is quickly approaching $4.00, which also happens to be the low set in 2010. If SD is going to bounce, it will likely do it off this area of long-term technical support.

Remember, SD hit our risk control line in mid-July. So only very aggressive investors should be hanging on for a potential year-end rebound.

. . . . Whiting Petroleum (WLL) October 17, 2014 $90.00 Calls

Investor shunned pretty much every oil and gas company out there today, including WLL. The Bakken producer sank to $74 a share on overall market weakness.

Remember, WLL crossed our risk control line at $83 a few weeks ago. Considering the bearish investor sentiment towards oil and gas names right now, only very aggressive investors should still be in this trade.

. . . . Penn Virginia (PVA) October 17, 2014 $15.00 Calls

PVA rallied nicely from the $11.50 area up to $13.30 over the past few days. But today’s all encompassing market selloff brought the Eagle Ford producer back down.

With expiration drawing near, we’ll need a big bullish run out of PVA soon.

Remember, PVA recently hit our risk control line at $13. That means only aggressive investors should be holding the $15 calls for a rebound. Our profit targets are $16 and $18.

. . . . Silver Wheaton (SLW) December 19, 2014 $25 Calls

Silver finally found buyers today at the $17 an ounce level. The last time the metal traded this low was early 2010. No doubt about it, silver is drastically oversold due the ongoing strength in the US Dollar.

The recent silver downturn has SLW trading at very important long-term technical support at $20. While conservative traders are already out of this trade, aggressive investors may want to keep holding the SLW calls for a potential rebound off this level.

. . . . Newmont Mining (NEM) November 21, 2014 $24 Puts

The downturn in gold, along with today’s general market weakness, has NEM on the verge of breaking below $23. If the gold miner drops below this important level, we could see a quick washout to our first profit target at $22.50.

As of today, our $24 puts are trading at a $1.61 bid, which is a 59% gain from our entry at $1.01. Keep holding your puts for further gains. Our profit targets are $22.50 and $21.00!

. . . . Agnico Eagle Mines (AEM) November 21, 2014 $30 Puts

AEM is breaking below important support at $30. As a result, our $30 puts are trading up to $2.23- a 50% gain from our entry. The recent drop in AEM is in spite of the fact gold has yet to drop to $1,200.

If the yellow metal does continues lower (which is likely), AEM has very good odds of dropping to our first profit target at $28. If gold plunges below $1,200, our second target at $24 is well within reach.

. . . . Occidental Petroleum (OXY) January 16, 2015 $110 Calls

Unfortunately, OXY was hit hard in today’s session. The international oil explorer and producer closed at $94.29, which is below our $95 risk control line. If you’re conservative, you may want to close this trade.

But before you do, take a look at this…

Despite OXY’s hefty downturn, our January $110 calls actually gained value today. That’s because there was a steady flow of buy-side volume in the $105, $110, $115, and $120 calls. In my opinion, someone is trying to gather out-of-the-money calls on the cheap!

We have a lot of time left in this trade, so aggressive traders should definitely hold onto these calls for a while longer.

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 an email at [email protected]. I’d like to know how you’re doing!

Category: Commodity Trading