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Ignoring Lows in Oil & Gas

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Range Resources - RRC - close: 41.77 change: +0.93 stop: 39.45

Why We Like It:
A downgrade this morning to underperform had no lasting impact on RRC. As a matter of fact shares of RRC have been ignoring bad news for a few weeks now. Shares have been on the upswing since they bottomed in early October and RRC has ignored the continual lows in oil and natural gas the last few weeks. Technical traders could argue that the stock has broken out from a bull-flag pattern and poised to begin its next leg higher.

We are suggesting readers buy calls right here following today's afternoon bounce from the $39.60 level. More conservative traders may want to wait for a new rise over $43.00 or the $44.00 mark before initiating positions. There is potential technical resistance at the 100-dma (currently $44.85) and at the exponential 200-dma (currently 48.01). We're going to aim for the exponential 200-dma, since that is where the rally failed back in September. We'll use the $47.50-48.00 zone as our exit target for now.

NOTE: Investors need to remain defensive. This is still a very tough market. That means trade smaller position sizes. Be extra vigilant with your stop loss management.

Suggested Options:
We are suggesting the December calls.

BUY CALL DEC 40.00 RRC-LH open interest= 423 current ask $6.00
BUY CALL DEC 45.00 RRC-LI open interest=3356 current ask $3.50

Annotated Chart:

Picked on November 18 at $ 41.77
Change since picked:      + 0.00
Earnings Date           02/26/09 (unconfirmed)
Average Daily Volume =       4.7 million  

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