The energy sector appears to be breaking out from a month-long consolidation. We want to add some exposure to the sector. In addition to tonight's new candidate there were several stocks that caught my eye as possible bullish plays, although a few might need to see a little profit taking first before I would consider new positions. On my watch list are: COP, MCD, UPS, OII, FDS, MON and SRCL.
NEW DIRECTIONAL CALL PLAYS
Cimarex Energy Co. - XEC - close: 83.74 change: +3.20
Stop Loss: 78.90
Target(s): 87.00, 89.90
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see below
Denver-based Cimarex Energy Co. is an independent oil and gas exploration and production company with principal operations in the Mid-Continent, Permian Basin and Gulf Coast areas of the U.S. (source: company press release or website)
Why We Like It:
Oil stocks are on the move. Both the OIX and OSX indices appear to be breaking out from a month-long consolidation. XEC is also breaking out from a multi-week consolidation. This could be the beginning of a new leg higher. Aggressive traders may want to buy calls now. I would rather not chase a +4% move. I'm suggesting we use a buy-the-dip entry point on XEC at $83.25. If triggered we'll use a stop loss under $79. Our first target is $87.00. Our second target is $89.90. FYI: The P&F chart is forecasting a $99 target.
Buy the 2011 January $85 calls (XEC1122A85) current ask $3.50
Entry on December xxth at $ xx.xx
Earnings Date 02/17/11 (unconfirmed)
Average Daily Volume = 907 thousand
Listed on December 1st, 2010