Option Investor
New Plays
HAVING TROUBLE PRINTING?
Printer friendly version
New Plays
Long Plays
Short Plays
BAS TOL
ESV  
HES  

New Long Plays

Editor's note: We are adding multiple bullish candidates in the oil sector. We suggest you only pick one or two that you like the most to consider as candidates for your own portfolio instead of trying to trade them all. It's not advisable to have too much exposure to one specific sector.

---

Basic Energy - BAS - close: 25.30 change: +0.77 stop: 23.99

Company Description:
Basic Energy Services provides well site services essential to maintaining production from the oil and gas wells within its operating area. The company employs approximately 4,000 employees in more than 100 service points throughout the major oil and gas producing regions in Texas, Louisiana, Oklahoma, New Mexico and the Rocky Mountain states. (source: company press release or website)

Why We Like It:
Oil and energy stocks look ready to move higher and shares of BAS, an oil services company, is breaking out over resistance. BAS has been consolidating sideways for weeks now and Friday finally saw a bullish breakout of significance. The stock pushed through resistance at the $25.00 level, its 50-dma, its exponential 200-dma and its six-month trendline of resistance (see chart). Our only concern with this play is the time frame. BAS is due to report earnings on Thursday morning, November 9th. Naturally we don't want to hold over the report. That only gives us three days to ride BAS as far as the breakout will carry it. We're starting with a stop loss at $23.99. You may want to use a tighter stop loss under Friday's low near $24.65. We'd be happy to exit at $27.50 so we'll use it as our official target.

Picked on November 05 at $25.30
Change since picked: + 0.00
Earnings Date 11/09/06 (confirmed)
Average Daily Volume: 287 thousand

---

ENSCO - ESV - close: 50.23 change: +1.69 stop: 47.49

Company Description:
ENSCO, headquartered in Dallas, Texas, owns and operates a modern fleet of offshore drilling rigs servicing the petroleum industry on a global basis. (source: company press release or website)

Why We Like It:
ESV's latest earnings report back on October 24th were better than expected and launched the stock into another leg higher. Shares have been consistently bouncing from its rising 10-dma and Friday's rally (+3.4%) produced a breakout over round-number resistance at the $50.00 level. Technical indicators have turned bullish and the P&F chart points to a $71 target. We are suggesting that readers go long the stock with the breakout over $50.00. More patient traders may want to try and jump in on a dip near its 10-dma, currently near $48.00. Our multi-week target is the $54.50-55.00 range. Be prepared for some resistance and a likely pull back near $52.50.

Picked on November 05 at $50.23
Change since picked: + 0.00
Earnings Date 10/24/06 (confirmed)
Average Daily Volume: 3.1 million

---

Hess Corp. - HES - close: 43.85 chg: +1.41 stop: 39.99

Company Description:
Hess Corporation, with headquarters in New York, is a global integrated energy company engaged in the exploration for and the production, purchase, transportation and sale of crude oil and natural gas, as well as the production and sale of refined petroleum products. (source: company press release or website)

Why We Like It:
Shares of HES managed a strong rally from its lows last Monday. The rebound has turned its short-term technicals back toward bullish signals and the weekly technical indicators are improving. The P&F chart is pretty optimistic forecasting a $57 target. We see Friday's rise as a new entry point to go long the stock. However, you don't have to open positions right here. You could wait for a new relative high over $44.40 (October's high) or wait for a dip back toward $43.00-42.50 as a potential entry point. We would have liked to have seen more volume on the move but with or without volume it looks like HES has turned around. Add into the mix some bullish sector indices for oil stocks and HES looks like a candidate for longs. We do have a relatively wide (aggressive) stop loss. More conservative traders may want to consider a tighter stop. Our target is the $48.00-50.00 range over the next several weeks.

Picked on November 05 at $43.85
Change since picked: + 0.00
Earnings Date 10/25/06 (confirmed)
Average Daily Volume: 3.7 million
 

New Short Plays

Toll Brothers - TOL - close: 28.23 chg: -0.44 stop: 30.05

Company Description:
Toll Brothers, Inc. is the nation's leading builder of luxury homes. The Company began business in 1967 and became a public company in 1986. (source: company press release or website)

Why We Like It:
Homebuilders have struggled to build on their September strength. TOL did better than many of its peers with the rally in early October but even TOL ran out of steam. The stock has produced a bearish double-top pattern and now we're seeing momentum reverse. The breakdown under $30 was bearish and now TOL is testing technical support at its 50-dma near $28.20. We want to catch any further breakdown so we're suggesting a trigger to short TOL at $27.95. It looks like a move under $28.00 will break the three-month trendline of support (see chart). If triggered our target is the $25.25-25.00 range. We do not want to hold over the early December earnings report. FYI: The P&F chart is still bullish for TOL and shares can trade to $25 and not break the current buy signal. Traders should also note that the latest (October) data put short interest at 15% of TOL's 114.9 million-share float. That's a high amount of short interest and increases the chance of a short squeeze should TOL suddenly move higher.

Picked on November xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 12/07/06 (unconfirmed)
Average Daily Volume: 3.5 million
 

Premier Investor New Play Archives