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Oil was moving down so nicely though Wednesday and then all hack broke lose. I am still clinging to the hope that we will get an April demand drop but that hope is fading with every uptick. I am going to maintain the triggers at the 100-day average until we get to mid April then reevaluate. When it comes it may be when we least expect it and it could be sharp.

We entered GM and CAL today and are left with only oil stocks at present. We came within 14 cents of being triggered on JBLU and I am going to leave that trigger open. If oil does drop we should get another pop in transportation.

I raised the targets on the refiners given the Texas explosion and the refinery outage in Venezuela. I also modified a couple entries on the oil stocks to reflect last weeks dip and average creep.

If we do get a big drop in oil and we start to get some entries triggered I want to avoid buying them all. After TWO energy stocks are triggered I want you to lower all the entry points $2 on everything else. If TWO more are triggered then lower the entry points $2 once again. Stop all entries at six energy positions.

I am not adding any new long targets on anything but oil because of the weak markets and the potential for a real failure once earnings break. I will put in some index puts next week on the DJX and QQQ. Somebody bought 20,000 September puts on the SPX at the $750 strike on Friday. That could be part of a spread play, portfolio insurance or maybe just a clue as to where the big money thinks we are going. That was a $3 million bet.


Dropped Entries  

New Watch List Entries 


Current Watch List

COP - Conoco Phillips
OXY - Occidental Petroleum
CVX - Chevron Texaco
UCL - Unocal
XOM - Exxon Mobil
XLE - Energy SPDR
VLO - Valero Energy
PCO - Premcor
JBLU- Jet Blue

The oil stocks are listed for reference because the actual prices are so far away from where I would like to get an entry. I am hoping for a sharp correction when it comes and the spring demand slumps. The targets are above the 100-day averages but with the averages rising it is where I expect them to meet.


COP - $110.27 Conoco Phillips ** Target $95.00 **

Last weeks -$6 drop was erased and we are right back at $110 resistance. Tough week for discount buyers.

Conoco is my first choice for an oil stock once the current trend eases. I would like to get an entry around the 100-day average now at $95 but rising. This has been a good support level in the past.

BUY 2007 $100 LEAP Call OJP-AT


OXY - $73.64 Occidental Petroleum ** Target $65.00 **

OXY would be my next choice with the same 100-day average as an entry point. That is currently $62 but I don't see the potential for a drop much under $65.

BUY 2007 $70 LEAP Call VXY-AN


CVX - $58.29 Chevron Texaco ** Target $55.00 **

Looking for a new entry around the 100-day average currently at $55.

BUY 2007 $60 LEAP Call VCH-AL


UCL - $64.38 Unocal ** Target $59.00 **

Unocal is a takeover target and any dip would make it more attractive to a buyer. I raised the entry point on UCL given the support over the last month and the constant takeover talk.

BUY 2007 $60 LEAP Call VCL-AL


XOM - $60.53 Exxon Mobil ** Target $55.00 **

XOM has larger reserves and more cash than any other oil company. They have to find something to do with their $28 billion and it will either be returned to the shareholders or used to buy more reserves.

BUY 2007 $60 LEAP Call ODU-AL


XLE - $43.93 Energy SPDR ** Target $38.00 **

The XLE covers all the bases and the options are cheap. We will not get the same move in the XLE as an individual stock but it is much more steady.

BUY 2007 $40 LEAP Call ORJ-AN


PCO - $64.19 Premcor ** Target $56.00 **

Premcor is an independent refiner with higher margins and upside potential from diversification.

BUY 2007 $60 LEAP Call VJE-AL


VLO - $77.72 Valero Energy ** Target $68.00 **

Valero is an independent refiner that has made the switch to the higher profit margins of sour crude.

BUY 2007 $75 LEAP Call VHB-AO


JBLU - $18.43 Jet Blue ** Target $19.50 and $16.50 **

If oil declines JBLU could attempt to rally but the outlook is still bleak.

BUY 2007 $15.00 LEAP Put VYO-MC if $16.50 target is hit
BUY 2007 $20.00 LEAP Put VYO-MD if $19.50 target is hit

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