Weekly Update: October 8, 2014
Weekly Update: October 8, 2014
Big Picture Outlook:
Weakness in commodities has spilled into yet another week…
WTI crude is down to $87 a barrel this morning while gold is struggling to hold on to $1,200 an ounce.
Thanks to the extreme bearishness in the oil market, sentiment towards oil and gas names has gone from casual concern to pure panic. Top-tier names like Continental Resources (CLR) and Whiting Petroleum (WLL) are under extreme pressure.
Here’s the deal…
Trading in CLR and WLL (and just about every other oil producer out there) has become completely irrational- fear has simply overtaken this industry. Investors seem convinced oil is heading to $70 a barrel, and they’re pricing oil producers accordingly.
Listen closely…
The likelihood of WTI dropping to $70 is very small. Yes, US production is at multi-decade highs and the European economy is slowing down. But remember, OPEC still controls the lion’s share of the world oil market. And they won’t stand for oil prices this low much longer.
I wouldn’t be surprised to see news out of the Middle East over the next few weeks in regards to this issue!
Until then, we need to let the smoke clear before we establish new positions in oil names.
Let’s get to the position updates…
Portfolio Highlights
Just a quick note: I won’t update every open position every update. I focus on the positions with significant news or price movement.
. . . . Triangle Petroleum (TPLM) October 17, 2014 $10 Calls
Leave it to investors’ irrational view of the energy markets to ruin our TPLM trade. The Bakken producer fell below $10 this week and it’s unlikely it will bounce back over $10 by the time expiration arrives next week.
As a result, this trade is officially closed. Remember, conservative investors collected profits in TPLM when it jumped to $12 in June.
. . . . Penn Virginia (PVA) October 17, 2014 $15 Calls
Unfortunately, PVA just couldn’t overcome the recent bout of extreme weakness in the oil and gas space. The Eagle Ford producer is trading under $11 a share as I write. With expiration next week, it’s unlikely our calls will recover their value. However, there’s still a chance we get bullish news in this name soon.
Remember, PVA recently hit our risk control line at $13. That means only very aggressive investors should be holding the $15 calls for a rebound.
. . . . Newmont Mining (NEM) November 21, 2014 $24 Puts
NEM hit our first profit target at $22.50 in recent trading! The fantastic drop sent our $24 puts soaring to a 112% gain. Conservative investors should have already taken profits off the table in this trade.
Now listen closely…
Usually I would recommend aggressive investors hold on to these puts for further gains. But with gold rallying hard in the afternoon trading session today, aggressive investors should close this trades as well!
. . . . Agnico Eagle Mines (AEM) November 21, 2014 $30 Puts
AEM suffered a nasty drop over the past few days!
In fact, the gold miner fell to our first profit target at $28 in yesterday’s session. The downturn sent our $30 puts to $2.96 a contract- a 100% gain from our entry. Conservative investors should have closed this trade with solid gains yesterday!
What should we do with this trade?
Like NEM, aggressive investors should also close this trade. This afternoon’s Federal Reserve meeting minutes were very bullish for precious metals!
You’ll see a new trade in the mining space soon!
. . . . Occidental Petroleum (OXY) January 16, 2015 $110 Calls
OXY dipped to $93 a share in this morning’s session before rallying hard into the close. Remember, since our $95 risk control line was hit a few days ago, conservative investors may have closed this trade for a very small loss.
If you’re aggressive, keep holding these calls for a rebound. We have a lot of time left until expiration and we’ve likely seen the worst for OXY.
. . . . ConocoPhillips (COP) January 16, 2015 $80 Calls
Not surprisingly, COP fell along with the rest of the oil industry in recent trading. However, it has yet to hit our $72.50 risk control line. Even better, the international producer is rallying nicely in to the closing bell today!
Keep holding your COP $80 calls for a bounce. Our profit targets are $79 and $81.
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 CustomerService@CommodityTradingResearch.com. I’d like to know how you’re doing!
Category: Commodity Trading
