Additional Trading Ideas:
In addition to tonight's new candidate(s), consider these stocks as possible trading ideas and watch list candidates. Some of these may need to see a break past key support or resistance:
Bullish ideas: NVDA, ATVI, ROCK, FSLR
Bearish ideas: WFM, MOH, JWN, FTD, URBN
NEW BULLISH Plays
U.S. Silica Holdings - SLCA - close: 21.27 change: +1.04
Stop Loss: 19.20
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on November 30, 2015
Time Frame: 8 to 12 weeks
(option traders exit prior to January expiration)
Average Daily Volume = 2.2 million
New Positions: Yes, see below
The crash in oil prices to six year lows has crushed the oil and gas industry. It has been especially hard on some of the oil service stocks. SLCA is in that group but the company and the stock is showing signs of a bottom.
SLCA is in the basic materials sector. According to the company,
"U.S. Silica Holdings, Inc., a member of the Russell 2000, is a leading producer of commercial silica used in the oil and gas industry, and in a wide range of industrial applications. Over its 115-year history, U.S. Silica has developed core competencies in mining, processing, logistics and materials science that enable it to produce and cost-effectively deliver over 260 products to customers across our end markets. The Company currently operates nine industrial sand production plants and eight oil and gas sand production plants. The Company is headquartered in Frederick, Maryland and also has offices located in Chicago, Illinois, Houston, Texas and Shanghai, China."
What's great about SLCA versus many of its peers is SLCA's diversity. They do sell a lot of fracking sand to the oil and gas industry but they also sell to a wide range of industries. The company also has one of the strongest balance sheets among its peers.
Year over year results have been rough. SLCA last reported earnings on October 27th. Q3 results were a loss of ($0.03) a share. That was a penny worse than expected. Revenues were down -35% to $155.4 million, which was just below the $155.7 million estimate.
It looks like an ugly earnings report and yet shares of SLCA soared more than 20% the next day. The company said their overall tons of sand sold was down -12% from a year ago but up +16% from the second quarter. Furthermore SLCA management said they were selling more sand to the oil and gas business and essentially stealing market share from competitors.
The outlook for crude oil is still muddy but it looks like shares of SLCA have found a bottom. The last few weeks have developed a trend of higher lows. The point & figure chart is still bearish but a rally above $22.00 would generate a new triple-top breakout buy signal. Plus a breakout past resistance could see some serious short covering. The most recent data listed short interest at 37% of the 49.4 million share float.
SLCA is going to present at the Cowen & Co. Energy Conference on December 1st and again at the Wells Fargo Energy Symposium on December 9th. If investors like what they hear these events could be a catalyst to spark the next leg higher.
Currently shares of SLCA appear to have short-term resistance in the $21.40 area. Tonight we are suggesting a trigger to launch bullish positions at $21.55.
Trigger @ $21.55
- Suggested Positions -
Buy SLCA stock @ $21.55
- (or for more adventurous traders, try this option) -
Buy the JAN $22.50 CALL (SLCA160115C22.5) current ask $1.65
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike