Asia remains closed (Monday should be a doozie) and Europe is up across the board so we might get a good finish to a great week!
If it weren’t Friday I would be shorting the hell out of oil but Iran still looms too large to leave that kind of money on the table over the weekend.
Commodities continue their run but we have to think about what will happen 8pm on Sunday when Asia reopens. I imagine there will be a lot of short covering on metals at the open which will lead to a lot of non-believers holding long positions that they will probably dump into the European open at 4am. Europe may or may not perceive gold being rejected firmly at $700 and we may be into a sharp correction by the time US markets open.
So I think I am going to be done with gold today. If it breaks and holds $700 there are a ton of good buys among the miners, copper too, but I think $700 will be a tough nut to crack without some consolidation.
Oil is in 2 day free fall but the oil stocks aren’t really buying it yet. This one is uber risky as anything can happen over the weekend but, if nothing does, then Asia will open with longs dumping positions and we will probably see a test of the 50 dma of $67.50 in the very least.
If oil can’t hold $70 today (a Friday) then it is in very serious trouble. Don’t forget that integrated oil Co’s like COP, XOM and SUN made less money at $70 than they did at $65 although a lot of that is due to whether prices are trending up or down for the quarter (down is better). On that basis, we could be setting up for a great Q2 for big oil as long as we make an orderly descent to $65 between now and July.
TOL will have the chance to wreck the markets today with a rotten report and Warren Buffet is holding his annual meeting – without Greenspan, he is by far the single most influential voice in the markets.
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Well, we were waiting to see which Global Whacko would crawl out of the woodwork to make some crazy statement to stir up the price of oil and we forgot to place bets on our local Hunter of Hunters! For some reason Cheney has decided to pick a fight with Russia all of a sudden so I am of the mindset that oil and gold will remain high today!
http://online.wsj.com/article/SB114673909470743648.html?mod=home_whats_news_us
I was itching to do some oil puts but today does not look like the day to start thanks to Haliburton’s former CEO deciding that $70 oil is a good reason to start attacking Russia!
I’m not doing any of these trades unless oil clearly falls below $70 and the Valero Rule approves – these are the highly risky trades I may be willing to hold over the weekend if Cheney doesn’t start WWIII…
Oil companies currently in denial inclued:
SU, way above the 50 dma of $80 so I like the $85 puts for $1.65.
BP $75 puts are attractive at $1.50.
TOT is near a double top (or a breakout!) and the $135 puts are high risk/high reward at $1.65.
PBR has a lot of production in Bolivia but the stock has been ignoring this problem and the $95 puts are far away but only .85.
http://online.wsj.com/article/SB114678670335544337.html?mod=yahoo_hs&ru=yahoo
GRP also looks double toppy after making an impressive recovery from a huge drop last week, a repeat would be amazing for the $50 puts at .65.
BJS is unlikely to make new highs this week so I like the $40 puts for $1.10.
OII will be interesting as they crushed estimates and will open near $70 but I may buy the $70 puts if they get down to $1.50 or less.
RDSA is a mile above the 50 dma at $64.50 so I’ll take the $65 puts for .10.
I will balance some of my puts with THE Jun $55 calls for $1.50 as the company posted .47 a share earnings vs .13 last year. That is after taking a one-time charge of .26/share! The company is “only” up 300% since last year so I think it has room to run.
While I am holding my XOM $62.50 puts I will begin buying some $65 calls for .40 to initiate a spread.
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Hold onto those ATVI and GME puts! ATVI just had bad earnings and bad guidance…
SNY posted huge numbers and should put the $50 calls for .50 into the money as long as fears of more generics don’t weigh it down too much.
ELN is getting close to announcing a re-release date on Tysabri so hold on to those BIIB calls and perhaps take the risk on the ELN $15s as long as they don’t go too crazy (should be a .70 premium max). The Jun $17.50s for .15 are a more relaxing way to play this as a gamble.
AU had a big beat today (not shocking) and if we are lucky, they will be as slow out of the gate as ABX was yesterday. Like ABX, AU is trading well below its Feb high of $62 even though gold is up 20% since then. They beat the old fashioned way, by keeping costs down! They are relatively unhedged so the future looks bright and I like the Jun $60s for $1.35.
OLED looks on track with narrowing losses but this is a very long-term play at $9.24 (up 15%).
BHP is another mining concern that should get more respect. As long as metals stay strong they have a lot of room to go and the Jun $50s look good at $1.15.
RTP is another miner that hasn’t doubled from Jan ’05 yet and I like the forward p/e of 12 which is based on underestimated mineral prices. I like the Oct $240s for $16.30 and selling the Jun $240s for $9.20.
Be careful with copper plays as copper contracts 5 years out are 45% cheaper than copper today, even if it doesn’t hold true, producers are working their way into dangerous hedges with this kind of spread.
FS has earnings just before market open and, if they are any good at all, I like them to break the 200 dma at $55.25 which will make me love the Jun $60s for .60 (a $1.10 premium).
I’ll take THQI later today regardless of which way they go. They had my second favorite earnings – sounds awful, isn’t really bad and I like them as a long-term play on the Jan $25’s, hopefully for a bit less than $3.
NBR reports Sunday for some reason and they are miles behind other drillers so I like the $40s for .65 despite the extreme risk.
If you think your gold stock looks toppy, check out GOLD today! I wouldn’t buy them, I think this is partially the result of having a good ticker symbol at a time when dumb money is flying into a sector…
We had a nice put play on PKS puts in March and they announce on Monday but the stock is already down 20% from that pick but if they fall past $8.25 then look out below!
NAK is up to $8 (up 30%) but MRB is just $3.34 (up 5%) – if gold breaks $700 this is one of my top choices! Again I swear it’s the overuse of the word “decline” that kills this stock!
http://biz.yahoo.com/iw/060406/0121789.html
TASR got a wonderfully worded ruling that should finally get them up to $12.50 so we’ll give them till September for the Sep $12.50s at .60.
http://biz.yahoo.com/pz/060505/98583.html
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When I was looking up PKS I noticed my 3/9 TOTD PGIC:
“PGIC has the next big thing in Vegas. You bet on each play of a game on a touch screen. I played the beta of this and it is amazing! The company had accounting problems that killed the stock but they just hooked up with the Palms and got approval for another platform of theirs in California. The stock is just $7.50 so it’s a buy and you can even be conservative and sell the Jun $7.50s for $1.45 and pocked a quick 20% but I would be willing to take a side bet that you will be crying when you get called away!”
http://finance.yahoo.com/q/bc?s=PGIC&t=3m
Good trading today,
– Phil
