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XLE $74.65 +0.03 - Energy Select SPDR

Lots of volatility ahead of Gustav but no trend. I raised the stop to $73 just in case the hurricane is a dud.

The XLE is a group of 36 companies in the energy sector. Exxon is the largest component and Tesoro the smallest. See the complete list here.

ETF Info:

Energy Select Sector SPDR Fund (the Fund) seeks to provide investment results that correspond to the price and yield performance of the Energy Select Sector of the S&P 500 Index (the Index). The Index includes companies that primarily develop and produce crude oil and natural gas, and provide drilling and other energy-related services. The Fund utilizes a passive or indexing investment approach to invest in a portfolio of stocks that seek to replicate the Index. The Funds investment advisor is SSgA Funds Management, Inc.

Breakdown trigger: $72.00, hit 8/04

Position: Dec $80 Call XTG-LB @ $3.00

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UPL $68.15 +2.50 - Ultra Petroleum

UPL has a nice series of higher lows but strong resistance at $73. If there is any disruption of gas from the gulf that resistance could be broken. Ultra has no exposure to the gulf. Our stop is $61.

Prior commentary:

Ultra reported earnings on 8/05 that more than doubled the comparison quarter on a 125% increase in revenue. Production rose +23% and the average sales price of gas was $8.06 per mcf. They get less for their gas because of their location in Wyoming. Once the pipeline is finished to the east coast their profits will again accelerate sharply. They have no downside risk with an active hedging program and no offshore or out of country assets.

Breakdown trigger: $65, hit 8/05

Position: 2010 $80 LEAP WSS-AP @ $13.50

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APC $61.73 +3.08 - Anadarko Petroleum

S&P revised APC to positive from stable after APC completed a period of restructuring efforts a $1.7 billion drop in debt in the first half of 2008. APC is expected to cut another $1.8 billion when it completes another sale of assets to Statoil.

No change. Stop at $56.

Breakdown trigger: $55, hit 8/04

Position: 2010 $70 LEAP Call YPC-AN @ $7.60

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BHP $70.51 +.97 BHP Billiton

No specific news and a continued move higher by BHP. Thursday saw a new four-week high and Friday was profit taking. Stop is now $60.

Breakdown trigger: $65, hit 8/05

Position: 2010 $80 LEAP Call LPH-AP @ $9.50

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COP $82.51 -.67 - ConocoPhillips

Conoco rallied on news it was selling the rest of its retail service stations in order to focus on exploration. Conoco will still have a long-term contract to supply fuel to the stations but will no longer be tied to the properties. Conoco will get something in the ballpark of $800 million from Pacific Convenience & Fuel LLC for the deal. The major oil companies now own less than 5% of U.S. service stations. Stop is $81. If Gustav is a dud we will probably exit on Tuesday.

Earnings July 23rd, $3.50 per share

Position: 2010 $90 LEAP YRO-AR @ $11.35

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ENER - $75.17 -4.21 Energy Conversion Devices

ENER blew out earnings with 24 cents when analysts were expecting 16 cents. The spiked over $82 on the news but their gross margin guidance drop from 33% to 31% was credited with knocking $7 off the Thursday high. On Friday Piper Jaffray downgraded them to neutral and Jeffries Paul Clegg raised his target to $96 and reiterated them as a buy. Clegg had nothing but good things to say about ENER and he expects the margin to continue higher as the year progresses. Cowen and Company called the results a solid beat ad said the guidance appeared conservative. Stop is $66.

Breakout trigger: $68.50 hit 6/16

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

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CRR $60.10 +1.74 - Carbo Ceramics

Carbo hit a new high at $62 on three days last week but was unable to move past it. On Friday they announced the sale of their Pinnacle Technologies subsidiary to Halliburton for $137 million. They also announced a buyback of two million shares. With only 24 million outstanding that is just under 10% of the outstanding shares. Stop is $53.

Breakout trigger: $48 Hit 5/12

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


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Non-Energy Positions
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RIMM $121.60 -9.85 Research in Motion

That was not a fun week. RIMM was crushed by the warnings in the chip sector and through guilt by association to Apple and their iPhone problems. I personally don't think they are related but whenever Apple is down RIMM is weak also. Our stop is $119 so any further decline will take us out of the play. RIMM reported on Friday the BlackBerry Bold would launch on AT&T on October 2nd and just in time for holiday shoppers.

Prior comments:

RIMM is a combo play this time around to offset the extreme cost of the call option. We bought the call for $27.50 and sold the $110 put for $20.90 for a net debit of $6.60. In theory the call will continue to appreciate as RIMM moves higher and the put will continue to decline as it gets farther out of the money.

Breakout trigger: $125, hit 8/06

Long 2010 $140 LEAP Call YKD-AH @ $27.50
Short 2010 $110 LEAP Put YKD-MZ @ $20.90, net debit $6.60
 

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