Good evening. Regardless of whether last week's rally was short covering or not, we have to respect the move. I believe the market sent a strong message to us last week, and that message is that the market is not ready to go lower, at least not yet. I'm not saying we go straight up from here but I do think dips will be bought. As such, I plan to exploit those dips by focusing more on long positions in the coming days/weeks. We will also tread lightly in the coming days to get a better sense of how far a pullback will take us, but SPX 1,080 offers strong support. Another scenario is that we go straight up to 1,130 resistance and the market doesn't let us in new long positions. We'll have to see how things play out this week. Trading will inevitably continue to be choppy so picking your exits and sticking with them is the right plan of action for now. Please email me with any questions.
NEW DIRECTIONAL CALL PLAYS
ConocoPhillips - COP - close 55.05 change +0.62 stop 52.85
ConocoPhillips is an international, integrated energy company. It has six segments. Its E&P segment explores for, produces, transports and markets crude oil, natural gas, natural gas liquids and bitumen on a worldwide basis. The Midstream segment gathers, processes and markets natural gas produced by ConocoPhillips and others, and fractionates and markets natural gas liquids, predominantly in the United States and Trinidad. Its R&M segment purchases, refines, markets and transports crude oil and petroleum products. The LUKOIL Investment segment consists of its equity investment in the ordinary shares of OAO LUKOIL. Its emerging businesses segment represents its investment in new technologies or businesses outside its scope of operations.
Target(s): 56.65, 57.50, 58.25
Key Support/Resistance Areas: 58.50, 57.00, 53.00 to 53.50
Time Frame: 1 to 3 weeks
Why We Like It:
Whether you believe the economy is improving or not, Oil companies should do well with the slimmest prospects of economic growth. Even if that growth is at a slower pace at least it is a contracting scenario we've been dealing with throughout August. Technically, COP has made a series of higher lows and is now above all of its moving averages. I would like to see some retracement of last weeks gains which I think will be bought. I suggest readers initiate long positions on weakness in the stock, using a trigger of $54.70 which is near Friday's lows and above the 20-day SMA. More nimble traders could consider buying a breakout over Friday's highs or wait for a larger retracement to the $54.00 area. But I'm not so sure we are going to get it prior to the stock advancing higher. I am looking for a $2 to $3 move higher and if triggered our profit projection for the first two targets is +55% and +80%. Our stop is $52.85.
Suggested Position: Buy November $57.50 CALL, current ask $1.23, estimated ask at entry $1.12
Annotated daily chart:
Entry on September xx
Earnings 10/28/2010 (unconfirmed)
Average Daily Volume: 8.9 million
Listed on September 4, 2010