NEW DIRECTIONAL CALL PLAYS
Cliffs Natural Resources - CLF - close: 56.12 change: +0.12 stop: varies
Cliffs Natural Resources Inc. (NYSE: CLF)(Paris: CLF) is an international mining and natural resources company. A member of the S&P 500 Index, we are the largest producer of iron ore pellets in North America, a major supplier of direct-shipping lump and fines iron ore out of Australia and a significant producer of metallurgical coal. With core values of environmental and capital stewardship, our colleagues across the globe endeavor to provide all stakeholders operating and financial transparency as embodied by the Global Reporting Initiative (GRI) framework (source: company press release or website)
Why We Like It:
The commodity-related names still offer some potential but it will depend on how the situation develops in Europe and how the euro and dollar react. If the dollar continues to rally commodities are going to struggle. Currently it looks like the euro has hit significant support and if the $140 billion bailout for Greece gets funded soon it should alleviate fears for further credit woes in Europe - at least for a while. I like CLF because the correction has stalled right where it should in the $50-55 zone, which as previous resistance should be new support. Yet before I go any further I have to warn readers that trading CLF is a high-risk bet. The Australian government is considering an extra 40% tax on profits for miners with operations in Australia and CLF is one of them. If that measure passes CLF could see further downside. I don't have a time frame on when this Australian tax might get voted on/approved. Keep your positions small!
All right I'm suggest we take a two-prong approach to trading CLF. The correction may not be over yet and shares could easily hit the $50-47.50 zone again. Let's use a dip at $50.25 to open small positions with a stop loss at $44.90 (again, this is a high-risk trade). If triggered at $50.25 our first target is $59.50.
If instead shares of CLF rallies from here then let's use a trigger at $60.60 to open small positions with a stop loss at $54.75. If triggered at $60.25 our target is $69.50.
Trigger #1 @ 50.25
Suggested Position: Buy the June $55 calls (CLF 10F60.00)
Trigger #2 @ 60.60
Suggested Position: Buy the June $65 calls (CLF 10F65.00)
Entry on May xxth at $ xx.xx See trigger(s)
Earnings Date 07/29/10 (unconfirmed)
Average Daily Volume = 8.7 million
Listed on May 8th, 2010
NEW DIRECTIONAL PUT PLAYS
Range Resources - RRC - close: 43.85 change: -2.38 stop: 48.10
Range Resources is an independent oil and gas company operating in the Southwestern, Appalachian and Gulf Coast regions of the United States. The Company pursues a growth strategy that targets exploitation of its sizeable inventory of lower risk development drilling opportunities including an increasing number of projects that target shale and coal bed methane resource projects. These development activities are combined with a complementary acquisition effort. Rangeâ€™s 2008 year-end drilling inventory included more than 12,000 proven drilling projects, and its leasehold position totaled 3.7 (3.0 net) million acres. Proved reserves totaled 2.7 Tcfe, a 19% increase over the prior year. (source: company press release or website)
Why We Like It:
In the CLF call play I just said that resource names offer potential and that's true. Yet oil names have been hit hard and the correction in oil may not be over yet. On a short-term basis crude oil looks oversold and it could bounce. Originally I was looking at oil names with a bullish bias and they may be bullish candidates eventually. Currently the trend is down. RRC has been in a major consolidation for months with higher lows and lower highs. Shares finally broke down this past week. We have to trade what the charts are telling us not what we want or expect to see.
I am suggesting bearish positions now or on a another failed rally in the $45-46 zone. Keep positions small since the market is volatile and oil looks a little oversold. I would not be surprised to see a bounce near the December low near $42.00. However, our first target is $40.25. Our second, longer-term target is $36.00.
Suggested Position: Buy the June $40 puts (RRC1019R40)
Entry on May 10th at $ xx.xx(?)
Earnings Date 07/22/10 (unconfirmed)
Average Daily Volume = 3.1 million
Listed on May 8th, 2010