Weekly Update: September 24, 2014

| September 24, 2014

Weekly Update: September 24, 2014

 

Big Picture Outlook:

This morning’s EIA oil inventory caught analysts by surprise. For the week of September 19th, US crude stockpiles declined by a hefty 4.3 million barrels.

The inventory downturn flew in the face of consensus estimates for a 400,000 barrel increase in supply.

How did crude respond to the news?

WTI spiked $0.70 a barrel right after the bullish data hit the wires. But within an hour of the release, the commodity had given up most of those gains.

Why can’t crude hold on to gains in recent trading?

At $91 a barrel, WTI is the cheapest it has been since early May 2013. Traders should be licking their chops at the thought of buying the world’s most important energy commodity at 16-month lows.

However…

There’s no question the ongoing US Dollar rally is keeping the entire commodity complex under wraps. Oil, gold, silver- you name it- nearly all hard assets are suffering right now.

But trust me. There will be a point when investors send the greenback lower. And when they do, commodity bulls will return with a vengeance.

Let’s get to the position updates…

 

Portfolio Recap: 

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

I think it’s fair to say bears have control of HK right now. The TMS producer plummeted into the low $4 range in recent trading as investors responded to the ongoing weakness in the entire oil and gas exploration and production (E&P) space.

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

Given the recent weakness in the E&P space, TPLM is holding up quite well. The Bakken producer dropped to the low end of its multi-month trading range on Monday only to bounce higher in yesterday’s and today’s session.

If oil can just catch a good bid, there’s still a chance TPLM runs to a new 52-week high by expiration next month.

Keep in mind, conservative investors already collected profits at our $12 target. Only aggressive investors should be holding for our second target at $14.

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

It’s official…

SD is getting flushed down the loo.

The Mississippian producer is dropping to new multi-year lows thanks to poor earnings released last month and ongoing E&P space weakness.

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

Despite all the bullish analyst upgrades and lofty price targets on WLL in recent months, the top-tier Bakken producer couldn’t fight off the recent bout of severe industry weakness.

Remember, WLL came within $0.08 of our first profit target at $93, which ran our $90 calls to an 88% gain. Of course, it wasn’t long after that the stock dropped to our risk control line at $83.

It’s disappointing to see WLL trade this low. But the good news is this weakness is setting up another great call buying opportunity!

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

Given the extraordinary amount of big-money call buying in late August, I’m quite surprised there’s no news to speak of in PVA yet. However, we still have a few weeks until expiration. So hopefully a bullish catalyst appears by then.

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

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

More pain for silver…

The metal broke into the $17 an ounce range last week as the US Dollar continued soaring. As you may know, this is the lowest silver has traded since mid-2010.

Unfortunately, the extended weakness in silver has sent SLW below our risk control line at $22.90. Conservative investors should have already closed this trade to conserve capital.

Aggressive investors may want to keep holding your SLW calls for a potential rebound. We still have a relatively large amount of time until expiration. Our profits targets are $27.50 and $30.00.

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

Despite the fact NEM is trading at technical support near $24, there don’t appear to be any bulls ready to take the gold miner higher. That’s likely because gold continues to trade weak in the face of the rising US Dollar.

With the yellow metal crossing the tape at $1,218 an ounce today, it’s highly likely investors take it down to yearly lows at $1,200 soon. Of course, such a scenario will be great news for our NEM puts!

Keep holding your NEM $24 puts for further gains. Our downside price targets are $22.50 and $21.00.

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

AEM is teetering on whole number support at $30. Should gold drop to $1,200 (which I believe it will), AEM has a very good chance of achieving our first profit target at $28.00. If gold plunges below $1,200, our second target at $24 is within reach as well.

Keep holding your AEM puts for further gains!

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