NEW DIRECTIONAL CALL PLAYS
Holly Corp - HOC - close: 26.86 change: +0.40 stop: 24.95
Holly Corporation is an independent petroleum refiner that produces light products, such as gasoline, diesel fuel, jet fuel, specialty lubricant products, and specialty and modified asphalt. The Companyâ€™s operations are organized into two reportable segments: Refining and Holly Energy Partners, L.P. (HEP). As of December 31, 2009, it owned and operated three refineries consisting of a petroleum refinery in Artesia, New Mexico that is operated in conjunction with crude oil distillation and vacuum distillation and other facilities situated 65 miles away in Lovington, New Mexico (collectively, the Navajo Refinery), a refinery in Woods Cross, Utah (the Woods Cross Refinery) and the Tulsa Refinery; owned and operated Holly Asphalt Company, which manufactures and markets asphalt products from various terminals in Arizona, New Mexico and Texas; owned a 75% interest in a 12-inch refined products pipeline project from Salt Lake City, Utah to Las Vegas, Nevada, and owned a 34% interest in HEP. (source: company press release or website)
Why We Like It:
HOC has touched the bottom of an upward channel which began in December. The stock has also formed two bottoming tail candlesticks (see ovals on chart) which signals that buyers are stepping in and sellers appear to be waning. I think the HOC is poised for a rally and we like it at current levels. There is overhead resistance at the 50-day and 20-day SMA's just below $28.00 which could pose some resistance, however, I think the stock will ultimately break through these levels. We will place a stop just below recent support and the 200-day SMA. Our 1st target is $28.90 and our 2nd target is $29.95.
From a fundamental/contrarian perspective, the Energy Information Administration recently indicated that consumer demand for gasoline this summer will increase only +0.5%, which may have sparked the sell-off in HOC on April 6. However, if consumers are truly making a comeback â€“ as the recent economic data indicates - then I suspect they will be traveling this summer. If any news surfaces that demand for gas will be stronger than last week's forecasts it could be a catalyst for HOC to trade higher.
Suggested Position: Buy CALL MAY $25.00, current ask $2.70
Entry on April 15th at $ xx.xx
Earnings Date May 6th (unconfirmed)
Average Daily Volume = 811,000
Listed on April 14th, 2010