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FWLT $140.50 -10.27 - Foster Wheeler

The volatility in FWLT is incredibly strong with $15 moves every other day. So far the support at our entry point of $135 is holding. Once the market quits selling the momentum stocks we should be in business.

The board just approved a 2:1 split subject to shareholder approval around January 8th.

Breakdown trigger: $135 hit 11/06

Position: 2009 $150 LEAP Call ZHF-AW @ $29.10

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FXI $178.37 -3.63 FTSE/Xinhua China 25 Fund *** Stop $165 ***

The weakness in the Chinese markets is continuing but the FXI appears to have found support at $180. 1.3 billion Chinese will be buying stocks again soon.

The FXI has PTR, CEO and SNP as components making it an energy mutual fund with 22 other China stocks for added benefit.

Breakdown trigger: $190 hit 11/05

Position: 2009 $210 LEAP Call VHF-AA @ $32.50

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PTR $189.90 -11.99 - PetroChina *** Stop Loss $170 ***

PTR is holding at our entry point of $190 and waiting for the Chinese markets to recover. No change in play.

Previous commentary:

After a $75 drop on profit taking we finally got an entry on PTR once again. The entry target was $190 and the stock declined to 190.32. Before I could get an email alert out to readers PTR rebounded to $194. The impact on the LEAP was minimal since it had not really adjusted to the low level from its recent price drop. PTR was called the first trillion-dollar stock last week after going public in Shanghai for $9 billion. Exxon is the second largest at $488 billion in market cap. Petrochina is seen as the figurehead for the Chinese stock market bubble. With earnings only half that of Exxon but twice the market cap it suggests one of those valuations is terribly wrong. Obviously it is PTR but with 1.3 billion wannabe investors in China and the Shanghai share price of only 59 cents it is very easy for buyers to afford it even at the trillion-dollar market cap. Granted there is a lot of fluff in PTR right now but eventually the Chinese markets will rebound.

Breakdown trigger $194.32 Entered on rebound from $190 on 11/08

Position: 2009 $220 LEAP Call ZJK-AZ @ $32.20

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XOM - $85.10 -1.75 Exxon Mobil

Exxon continues to be volatile and declined with oil prices to $85 and did not recover. Our worst-case risk came to pass at just above the 200-day average of $83.25. XOM is holding at $85 and passing time.

Breakdown trigger: $88 Hit 11/01

Position: 2009 $100 LEAP Call ODU-AT @ $7.90

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CAM - $89.33 -$6.09 Cameron International *** Stop Loss $83 ***

I am disappointed with CAM for breaking the 50-day but glad it chose not to break the 100-day average at $86. That should be the worst case but of course that remains to be seen.

Breakdown target: $95 Hit 10/30

Position: 2009 $100 LEAP Call OKA-AT @ $18

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SLB $93.46 -1.30 - Schlumberger

No specific news on SLB and resistance at $100 is still firm but support at the 100-day average of $95 broke on the market implosion on Monday. We have risk to $85. but $90 appears to be holding. No specific news.

Breakdown target: $95.00 hit Oct-22nd

Position: 2009 $100 LEAP Call VWY-AT @ $15.60

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CVX $85.98 -1.28 - Chevron

Chevron was upgraded by UBS on Friday from sell to hold. I guess we should appreciate small favors in a rocky market. No other news and we are still well above the 200-day at $82.50. We are only down -$1 from our entry point at $87. No stop today.

Breakdown trigger: $87 hit Oct-22nd

Position: 2009 $100 LEAP Call VCH-AT @ $6.40

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OII $66.01 -2.99 Oceaneering International

OII gave up ground with the rest of the sector on Monday and fought all week to get it back. Monday's support test at $62 dates back to early August. Hopefully it will hold.

Earnings Nov-1st: +40%

Breakdown trigger: $72 hit on Oct-22nd

Position: APR $80 Call OII-DP @ $5.40

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NOV $64.44 -6.69 - National Oilwell Varco

NOV was one of the strongest momentum stocks of 2007 and that momentum finally failed on Monday. Support at $70 was crushed for a -$10 intraweek dip. NOV recovered somewhat by Friday's close but it was still an ugly week. NOV is resting on its 100-day average at $64 but that won't help if the market does not recover. I am holding on to NOV because our option premium at risk is only $3.20. If the market recovers we could easily double that with any material momentum recovery.

Breakout Trigger: $80, hit 10/11/07

Position: 2008 May $90 Call NON-ER @ $7.20

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MDR - $50.01 -6.12 McDermott Intl *** Stop Loss $45 ***

MDR cracked support with the rest of the services sector and fell -$6 for the week. Resting solidly at the 100-day at $50 I am hoping the worst is over. They were upgraded to a buy on Wednesday by Calyon Securities.

Earnings: Nov 8th, +37%

Breakout trigger: $53, hit 9/20

Position: 2009 $60 LEAP Call OYZ-AL @ $9.00

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UPL $66.88 -0.22 - Ultra Petroleum *** Stop Loss $62 ***

Ultra traded sideways for the week on rising gas prices and was one of the best performers in the portfolio. Definitely no complaints. No news.

Breakdown target: $52.50 Hit 8/30

Position: Jan 2009 $60 LEAP Call OZH-AL @ $8.00

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CHK $38.18 -2.04 Chesapeake Energy

CHK crumbled on Monday on no news and failed to recover. This was likely profit taking with the sector from the record high set the prior week. With gas prices rising any drop in CHK should be short lived.

Earnings: Nov 7th -34%, beat by 3 cents.

Position: 2010 $35 LEAP Call WZY-AG @ $6.60
10/28 Price update: Expired Oct Put +90 cents, $7.50

Insurance put:
Oct $30 Put CHK-VF @ 90 cents. Expired

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HP $34.08 +1.92 Helmerich & Payne *** Stop Loss $29.50 ***

HP reported strong earnings and rocketed to a new 2-month high on Friday. Just when the service stocks were falling to new depths it is nice to have one stock defying gravity.

Earnings: Nov-15th, +18%, beat street by +6 cents at 93 cents

Position: Jan 2009 $35 LEAP Call ZQA-AG @ $4.50

Insurance put:
Position: Nov $30 HP-WF. @ .50, Stop $28.50

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HERO $26.36 +.26 Hercules Offshore ** Stop Loss $24.00 **

Insider buying in HERO helped lift it from the Monday sell off. No other news. Maintain the stop at $24.

Earnings Oct-30th. +63%

Position: 2008 April $30 Call HIQ-DF @ $3.00

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BHP - $74.73 -1.08 BHP Billiton ** Stop Loss $60.00 **

BHP fell $16 after it said it wanted to buy RTP for $174 billion. Late this week rumors were circulating that RTP may be considering an offer for BHP in what is called the Pac Man defense to a hostile takeover. The Pac Man defense is named for a 1980s video game where a smiley face runs around gobbling up evil icons until time expires and those icons begin to chase the Pac Man in return. BHP has twice the market cap of RTP and late Friday analysts were saying RTP would not try to fend off its rival using the Pac Man defense. They said BHP has more credit and could probably outbid RTP and the deal would come down to who the investors wanted to run the combined companies. Secondly if RTP bought BHP it would have to cede some control to an Australian headquarters and analysts don't think that would fly with English investors. I would expect continued weakness in BHP until the current bid process for RTP runs its course. A successful bid or a cancellation of the bid should give the stock a boost. It is the indecision that creates weakness.

Breakdown target: $55 hit 8/15/07

Position: 2010 $70 LEAP Call LPH-AN @ $9.00

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CCJ - $42.28 -4.95 Cameco ** Stop loss $40 **

What the heck? I was shocked when CCJ did not recover from the Monday meltdown like the rest of the energy sector. Initial support at $44 cracked and quickly became resistance that could not be broken. There was absolutely no news and I have to think it was just the same profit taking that hammered the solar stocks early in the week. Currently holding at $42 I am going to place a stop at $40.

Earnings: Oct-31st

Breakdown target: $35 Hit 8/16/07

Position: 2010 $50 LEAP Call LTA-AJ @ $7.20


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Non-Energy Positions
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None


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Covered LEAP Calls
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LVS - $118.76 +2.85 Las Vegas Sands

The Sands continued its rebound and appears poised to break current resistance at $120 on any return to a positive market. They announced last week the planned Dec-20th opening of the Palazzo Hotel and Casino in Vegas. Reportedly this will be the most luxurious hotel in Vegas. No change in play.

Covered LEAP Call

LONG: 100 Shares LVS currently $117
SHORT: 2009 $140 LEAP Call ZAU-AY @ $20.00 No Stop

 

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