Option Investor
Play Updates

In Play Updates and Reviews

HAVING TROUBLE PRINTING?
Printer friendly version

TRN $31.90 -2.86 - Trinity Industries

No news but TRN declined to strong support at $31 thanks to the bear market. Stop is at $30.

Breakdown trigger: $35 Hit 6/26

Position: 2010 $40 LEAP Call YJS-AH @ $6.90 6/26

********************

GDP $73.30 -2.38 Goodrich Petroleum

Strong $5 dip to support at $70 on Thursday but that was minimized by the strong gains earlier in the week. No changes.

Good article on Goodrich here

Prior commentary:

This company is rocking on its new found fame. It quietly collected a huge acreage position in the Haynesville Shale natural gas field before it was widely known as a monster discovery. In late June Chesapeake agreed to pay Goodrich $178 million for a 50% ownership in a portion of the acreage. Chesapeake is planning on drilling 440 horizontal gas wells on the property. This is a monster win for Goodrich and it has been somewhat of a secret until recently.

Breakout trigger: $66 Hit 6/23

Position: 2010 $80 LEAP Call LP-AP @ $21.00

******************

HK $46.92 +3.96 Petrohawk Energy

HK dropped -$7 intraday on Thursday before recovering almost all to end down -1.46. Every dip on HK is instantly bought. On Thursday Chesapeake said it had sold 110,000 acres of its Haynesville Shale acreage to Plains Exploration for $25,600 an acre plus development concessions of $1.65 billion. This price tag on land means HK's current holdings are worth more than $7.4 billion in this play. HK only has a market cap of $9 billion meaning all the other assets are seriously undervalued. It may take several weeks for the news on HK to sink in but it should be going a lot higher even with its PE of 401. Revenues are exploding.

Breakout trigger: $40.75 Hit 6/23

Position: DEC $50 Call HK-LJ @ $4.50

******************

CHK $66.78 +2.69 Chesapeake Energy

CHK lost a lot of its gains from Wednesday to $74 but still kept enough to remain positive for the week. The spike to $74 came on an announcement about a sale of a 20% interest in some Haynesville Shale property to Plains Exploration for $1.65 billion in cash and drilling concessions of another $1.65 billion. Plains only acquired a 20% interest for a lot of money. CHK has acquired 550,000 acres in the play and expects to buy more.

Previous commentary:

This is another stock that refuses to pull back but the news is too good to let it continue to run away from us. As I mentioned in the GDP lead CHK paid $178 million to Goodrich for a 50% working interest in some Haynesville Shale acreage. As I read further CHK said the Haynesville Shale could end up being the biggest asset they own and produce more gas than any other CHK property. That is a huge statement given CHK's massive footprint in places like the Barnett Shale in the DFW area. Encana (ECA) is the largest gas producer in North America and they said the Haynesville Shale could be the biggest deposit in North America.

Breakout trigger: $67 Hit 6/23

Position: 2010 $80 LEAP Call WZY-AP @ $17.40

********************

ENER - $64.06 -7.26 Energy Conversion Devices

It was an ugly week for energy stocks with ENER down -$23 from its high two weeks ago. $60 is strong support and the stop is at $58. No news.

Breakout trigger: $68.50 hit 6/16

Position: 2010 $80 LEAP Call KYU-AP @ 23.10

********************

FTK $18.52 -1.52 Flotek *** Stopped ***

No specific news but FTK took a dive over the last two days to trigger our stop at $18.

Breakout trigger: $21.00 Hit 6/17

Position: 2010 $25 LEAP Call YVB-AE @ $5.20, exit 4.50 7/03

*******************

BTU $77.62 -6.43 - Peabody Energy

$88 to $73 in only two days! Very painful but not as bad as some of the other coal stocks. This is clearly a case of fund managers heading to the sidelines as the market hit bear territory. Selling even the winners does not say much for market sentiment.

Breakout target: $81 Hit 6/09

Position: 2010 $90 LEAP Call LLW-AR @ $19.92

*******************

BP $66.34 -1.44 - BP PLC *** Stopped ***

With the Russian partnership still in limbo BP finally succumbed to the market weakness. We were stopped on Wednesday at $66.

Breakdown trigger: $68. Hit June 4th.

Position: 2010 $70 LEAP Call WAO-AN @ $7.30, exit 7/02 $7.20

*****************

PDE $43.34 -4.45 Pride International

Only a 50-cent loss on Thursday but the rest of the week was ugly. No news. Stop is at $42.

Zacks recently reiterated a buy rating on PDE on Friday based on their $9.4 billion backlog and their emergence as a pure play deepwater driller. They have sold off their non-core assets to leverage the deepwater play. The market is still valuing them as a shallow water jackup play and they are no longer in that sector. They are a strong takeover target given their small size and sector.

Position: Jan 2009 $50 Call PDE-AJ @ $3.70

I went with a Jan call instead of a LEAP because an acquisition would limit LEAP appreciation. I wanted to be close to the current price with a cheap option.

*******************

CRR $54.27 -2.79 - Carbo Ceramics

No news and only a minor decline from its highs. No complaints!

Breakout trigger: $48 Hit 5/12

Position: Dec $50 Call CRR-LJ @ $5.80

******************

PBR $65.72 -3.51 Petrobras

A washout in the Latin American markets kept PBR from a gain but support at $65 appears to be holding. Analysts continue to pound the table on PBR so it is only a matter of time before it moves higher.

Prior commentary:

Petrobras reportedly made another light oil discovery offshore in block BM-S-9. This is an ultra-deep field like the rest and reportedly it is a large discovery. The government officials continue to get in trouble for spilling confidential data before Petrobras does and that happened again last week. Petrobras said the Tupi field will be operational by 2010 with 100,000 bpd and will be producing 500,000 bpd by 2020. The first actual production test is set for Q1-2009. Lifting costs are expected to be $8.20 per barrel. Tupi reserves are expected to be between 5-8 billion barrels. They have only drilled two wells at Tupi and the first one took 14 months and $240 million. Now they are drilling wells in 2-3 months at $60-$80 million each. Petrobras is going out for bids on the construction of 28 new drilling rigs. They will be Brazilian made and delivered between 2013-2017.

Every dip is a buying opportunity.

Breakout trigger: $125.50 hit 4/28

Position: 2010 $150 LEAP Call YMO-AV @ $22.10

********************

NE $61.65 -3.11 - Noble Corp

Analysts still positive on Noble as well and other than the Thursday market drop NE is still holding up well. Support at $62.

Noble recently won a $4 billion contract to drill for Petrobras off the coast of Brazil. This is a monster payday and just one area of exploration for Noble.

Breakdown trigger $56.00 hit 4/29

Position: 2010 $70 LEAP Call YVJ-AN @ $8.10

******************

NOV $85.12 -3.29 - National Oilwell Varco

Same story as the rest of the market. NOV was holding at the highs until Wednesday. Citigroup initiated a buy on NOV with a $105 price target but it was the wrong day for the sector with selling hitting across the board. Still in no danger with support at $80.

Breakdown trigger: $67 Hit 4/30

Position: NOV $80 Call NOV-KP @ $5.40

***************

FLS $114.65 -23.49 - Flowserve *** Stopped ***

This was a major surprise. FLS crashed at the open on Thursday on absolutely no news. Two of us looked for news for over an hour with no luck. Fortunately we got in a lot lower and exited with a profit. I would jump back in instantly once we find out what caused the drop.

Breakout trigger: $110 Hit 4/16

Position: OCT $120 Call FLS-JD @ $10.40, exit $13.50, 7/03


****************************
Non-Energy Positions
****************************

TRA - $45.68 -4.67 Terra Inds *** Stopped ***

Stopped on an opening drop to $42 on Thursday. No news and brokers are still positive. This is just a market problem not a stock problem.

Entered 6/23 at $49.75

Position: 2010 $60 LEAP Call KMK-AL @ $14.80, exit 8.60, 7/03
 

Leaps Trader Update Archives