Oil and Gas

[brasos]

Anyone looking to load up on Oil and Gas stocks as they get pummeled - here are a few that i am keeping my eye on CHK, DVN and COP

[Team Binnion]

Loaded up on NOV.

[rvj]

STXX, a small pink sheet stock, has been paying off for me the past eight months.

[SNAPPERHEAD]

waiting for a bottom..and maybe a dead cat bounce first..

Oil services will continue to make some money as long as oil stays above 40$ ,
the refiners havent really done as well..

[Sow Trout]

Jim Jubak has a good article about that today. You can find him on Microsoft's Money in the Jubak's Journal portion.

[Monarchy]

*** The following comments are made by an energy trader, not a stock trader. Read at your own risk and NEVER trade what other people recommend. It's your money, do your homework. ***

There has been massive liquidation of long positions across the energy complex. Oil companies, refiners, everybody's stock has taken a hit because CL, HU, RBOB, NG have traded lower. Notice how EVEN with headlines about Israel generating plans for tactical nuke strikes on Iran, energy prices still WENT DOWN?

A couple things haven't changed. Americans still want to drive SUVs, the Chinese economy is still going gangbusters, refineries are still not being built and we all will be hitting the roads in a couple months for summer (as we always do).

Fundamentally, that makes me bullish crude and product related stocks. Technically, I want to see some type of bottoming formation to be a buyer.
http://finance.yahoo.com/q/bc?s=VLO&t=6m&l=on&z=l&q=b&c=
Look at a Valero 6 month daily bar chart. It made a low in early October and just tested that low (but couldn't take it out) a couple weeks ago. Volume has been building on the upmoves. I really like that formation (works in commodities as well).

So, I have a fundamental market call that refiners will trade higher. Plus, they have just suffered a big sell-off in the last year. Plus, I believe I know why they sold off. Plus, I'm seeing technical strength.

How did I trade it? I made an anger purchase at $52ish (which are VERY HIGH RISK). I had a good fundamental call but didn't have a technically bullish chart. So, I also sold March $55 calls and collected $4.10 which would cover me down to $48ish and not lose money.

When we retested the low several days later (and couldn't pierce it), I know had fundamentals and technicals lined up bullish after a good sell-off. I don't see that very often. So, I tripled my position from $48 to $50 (my bottoming formation). On the last dip that didn't pierce lows, i bought back my calls (for $1.70 netting me $2.40 gain).

Also notice that down here VLO starting moving higher at times when crude was still getting punished to the downside. Here is VLO versus the crude etf (exchange traded fund that mirrors the crude contract)
http://finance.yahoo.com/q/bc?t=6m&s=VLO&l=on&z=l&q=b&c=USO

So now patience is in order. The market is going from lower left to upper right and I need to sit quietly. What is my stop? When fundamentally the market looks bearish and it technically breaks down...new lows under $47 will make me sell more calls. New bearish information and lows under $47 will make me stop out.

Sorry for the length.....without detail it goes from worthless information to REALLY worthless information, lol.

[Mschuste]

I do trading in several oil and gas companies. The one i like the most is Chevron. (CVX) Over the past 8 months it has steadily risen from mid 50's to the low to mid 70's. It has a small dividend, but overall looks very promising. Another company i liked at the time was Quicksilver (KWK). I bought some of their stock for about 32 and it got as high as 44 in about 6 months. With chevron finding more oil this past week look for chevron to be moving up.

[Sow Trout]

Roads?.
"A couple things haven't changed. Americans still want to drive SUVs, the Chinese economy is still going gangbusters, refineries are still not being built and we all will be hitting the roads in a couple months for summer (as we always do)."
I am going by boat.

[4x4tx]

What about oxy?

[Monarchy]

Valero Update -

Great rally in crude, heating oil and gasoline brought oil/refining stocks higher in the last several weeks.

Valero rallied back up to over $55. Two days ago, the crude looked very heavy as it made a double top (two days achieving the same high and failing). Fearing a pullback in crude (and then Valero stock), I sold June $55 calls for around $4 for 1/3 of my position. I didn't sell calls against my entire position because I'm still bullish longer term.

That trade (selling calls) looked brilliant for ONE DAY. Crude pulled way back and Valero started trading lower. Yesterday, however, crude rallied very hard and Valero is now trading over $56. If crude comes off again, I'll buy back my short June 55 calls in the next few months.

But what happens if Valero only trades higher until June? Well, 2/3rds of my position is very happy. But what happens to the 1/3 that I sold calls against?

If the stock continues higher, I will get exercised on my short calls and make $5 on the stock (bought 50's - see above, sold 55's as calls get exercised) and $4 on selling the option. $9 on a $50 investment in 6 months is 18% in 6 months or 36% annualized so it works quite well.

If the stock trades lower until June, I make $4 from selling the calls but will have an unhappy long stock position.

This particular strategy is called "selling covered calls". They are "covered" because you own the underlying instrument (the stock). Options are pretty cool because time itself has value and you can monetize it by selling options.

[Mr. Breeze]

monarchy, good stuff, thanks for the details.

See my post about new kids.

[Team Binnion]

As stated, I loaded the boat on NOV in the mid 50's, take a look at what it did this week, whent over 65 and was at 68.

[Mr. Breeze]

As stated, I loaded the boat on NOV in the mid 50's, take a look at what it did this week, whent over 65 and was at 68.OK, good pick, whats your next one? :)

All the so called analyst like CVX more than XOM. Chevron over Exxon?

[Mschuste]

I picked CVX back in July when the price was around 56 or so..now it is up to about 74...Certainly was a good buy back then. Hopefully with the gas prices going back up, the price per share will increase as well

[Team Binnion]

I think watching the service companys at this time and buying on a pull back here and there is a great move at this time. The stormy season is just around the corner, and all the service company's need is one storm, and they are going to go up.

[Mr. Breeze]

Team Binnion, Cramer gave NOV another two thumbs up tonight. Hydril was taken over and went to $97 or so. Cramer says Wall Street just doesn't like oil services but they are wrong in his opinion. NOV still has $6B in back orders. Looks safe to buy on pullbacks. Was $70 a year ago and the numbers were not as good as now.

[Monarchy]

The oil company conspiracy theorists are back whining about what they-no-not- of.....soooo, I'm going to trim back my Valero length by selling half of my remaining position (I sold calls against 1/3 of it earlier). Patience has worked for the last 3 months and the stock has traded from $50ish to $67ish. So I'll take $17 profit and call it 30% return in 3 months (not including dividends) on this chunk. This will leave me 1/3 of my original position left to see how stupid it gets on the way up (if it indeed does).

This has been a freaky strong move. http://finance.yahoo.com/q/bc?s=VLO&t=3m&l=on&z=m&q=b&c= It really looked like it wanted higher but this was a very nice gift...we'll treat it as such and be thankful.

[Monarchy]

Zowie! Gasoline inventories come out every Wednesday and two days ago they showed HUGE withdrawal. HUGE HUGE HUGE. Even after the huge runup in VLO, I have to have more upside than the remaining 1/3 of my original position. So, I bought $70 calls for $.45. Got a nice move up yesterday ($1.28). Headlines are nutty....seems there is a refinery problem daily.

[Monarchy]

Guess I'll keep talking to myself, lol. VLO has traded up into the high 70's. I had sold calls against all my length or just taken profit so several weeks ago I starting selling puts. I wasn't prepared to get long again in the 60s (too scary, my loss) so I started selling puts to be a little more conservative. With the stock up here, I'll just keep selling puts until I get exercised and take a couple bucks worth of premium in the meantime.

Two other stocks to watch are Suncor, one of the big Canadian oil companies that is sitting on a bunch of oil sands. Canada will become the Saudi Arabia of the next 20 years with all those reserves so I'll own that stock for awhile. I bot 84 and sold the 90 call against it (sold the call for about $4) that looks like it will probably get exercised. That looks like a 12% return over 6 months if we keep the stock price up here at 90.50.....so, I'll be happy even though I didn't participate on the whole move up if the stock wants to keep running. Until the fundamentals tell me different, I just own that stock and sell calls around 10% out of the money until further notice.

Last stock is ICE. It's an electronic exchange that is doing superb and keeps buying exchanges. Somehow I wasnt' an idiot and caught the monster move from $50 to $150-$170 (that never happens to me). The stock pulled back from 170something to 125ish and I started selling puts....6 month tenor and about $11-$12 premium. Again, I wasn't brave enough to own the stock (my loss) but brave enough to sell puts. If they expire worthless, I'll keep selling puts until I get exercised....or until I see something change in the market that says ICE isn't something to own. I also got long the stock and sold at the money calls (struck right where the stock was trading) for another account.

These several stocks keep wanting to give nice returns by either selling naked puts or covered calls so I'll keep doing just that until the energy complex turns very bearish. My writing this is almost a guarantee that will happen! Please keep in mind I'm not a professional equity trader and you shouldn't listen to free advice like this. This strategy only works for stocks that are flat or go up....if they get clobbered, your option premium is a bandaid over a bullet wound.

[rio frio]

vlo up 49% since jan 1...tso was 62 on jan1,,,went to 120 and just split...cop.... mro....all making money ....rio

[Sow Trout]

Stop trying to time the market. Just invest in good companies and let their management make money for you.

[SNAPPERHEAD]

heres 4 that still have a ways to go yet.....
dig is an etf
http://finance.yahoo.com/q/bc?s=NOV&t=1y&l=on&z=m&q=l&c=pcz,wnr,dig

[Monarchy]

The saga continues...

Valero has gotten absolutely hammered. After charging up from $45 to $75, its back off to around $61. That's about a 50% retrace for you Fibinocci fans. Gasoline prices have stabilized and come off a bit while crude prices have continued to run up. That is squeezing the crack (refiners make less money) but dang, a 20% correction for Valero?

The gasoline makes sense...we're coming off summer driving season and we're almost through first half of storm season with no issues. The crude is confounding me. We have great inventories and gasoline prices haven't gone up but crude is way up. The media makes it seem like $80+ is a foregone conclusion so that means we're probably close to a top but I have no dang idea how much further it'll go before we stop!

So, I'm selling more puts. I sold the VLO Jan $65 put for $10. If the market trades all the way down to $55, I'm break even on the trade and own VLO at $55. That works for me. If VLO goes up from here, I collect $10 for sellling the option while $55 sits idle (in case I have to buy the stock). That should be over 25% annualized return and that works for me, too. If I get my face torn off because VLO trades way below $55, it means that I'm buying VERY VERY inexpensive gasoline and diesel personally. I'll take that risk. And because the crude looks so out of whack, I'm shorting the crude ETF (USO). It's got way more risk but crude is just silly up here.

I don't think of this as market timing.....pretty sure this Aggie isn't near smart enough to do that. I am, however, buying into stocks I believe are strong when they make big dips....and, I'm doing it conservatively by selling puts instead of buying the stock outright. I doubt I'll match '06 (33% return) but its fun and outperforms the buy and hold strategy (which is a very good one!).

[Monarchy]

If nothing else, this thread is helping me do "look backs" into the market....lol.
Two months later and gasoline stocks keep getting more bullish and folks are still buying 350hp SUVs, lol. And even though crude has charged up with gasoline, VLO is back up around $75.

Instead of buying VLO at $61 and being up $14, I sold $65 puts for $10 and I've only made $5 on them....that's the trade-off of selling puts and being able to still make money when a stock is flat or down a little. When the stock makes a nice run higher, you don't participate all the way.

For now I'll sit tight. If the market trades back down but doesn't make a new low, I'll sell more puts. If it trades higher, I'll take the $10 profit at the end of the year and look for another dip.

Note to self...the next time the market hammers VLO when the fundamentals are still bullish, just buy the darn stock.

And while I'm at it....the entire planet JUST KNOWS that GOOG is going to $700. So, I bought some $400 puts that don't expire for 27 months. IF the economy stalls for some reason and the selling starts, folks won't be able to get out of the way fast enough as this stock falls. That's my story, anyway.

[John Galt]

Two other stocks to watch are Suncor, one of the big Canadian oil companies that is sitting on a bunch of oil sands. Canada will become the Saudi Arabia of the next 20 years with all those reserves so I'll own that stock for awhile..I had a boss who saw this coming..his trade was to buy a Canadian ranch with USD denominated debt....did very well when the exchange rate went against the US. He lived in Michigan, though, and had use of the ranch on weekends.

I can't help thinking that the Loonie will continue to blow doors off the USD.

[Monarchy]

Huge build in gasoline today...that just don't happen at the end of November. There was a HUGE withdrawal of crude but that is mostly tied to the pipeline outage. With that, energy complex was down (crude, heating oil, gasoline).

That is not a good sign. I hope everybody didn't get caught up in the $100 garbage and started structing some downside.

Now, if March crude will just go down to $70

[John Galt]

Huge build in gasoline today...that just don't happen at the end of November. There was a HUGE withdrawal of crude but that is mostly tied to the pipeline outage. With that, energy complex was down (crude, heating oil, gasoline).

That is not a good sign. I hope everybody didn't get caught up in the $100 garbage and started structing some downside.

Now, if March crude will just go down to $70Hard to beleive it was knocking on a $40-handle last January.

last week was a good opportunity for producers with, say $60-$80 costless collars to upgrade their floor by $10.00 for a couple of bucks. You'd do this not to protect downside but to up your borrowing base on reserve-based lending, probably borrow for LIBO plus 200 bps and use the money for capex or reserve acquisition. If you had some junk paper out there, esp 144 paper, you might buy it back and raise your bank debt to cover (typically swap 30 cents of bank debt per buck of paper, so this is limited) as the paper market is still on life support.

Interestingly, reserves have not run near as much as the commodity.