EOT Trade Alert – May 13, 2008

May 13, 2008

Trade Alert:

    Buy NGS July 2008 $30 Calls at $1.75 or better (NGSGF)   

Brief Company Background:

Natural Gas Services (NGS) provides compressors, gas flare stacks, and flare ignition systems for plant and production facilities.  Their equipment and services are delivered primarily to the natural gas and oil industry.

Short-Term Catalyst:

No big surprise with this selection.  It’s kind of like deciding to sell picks and shovels to the gold miners during the California Gold Rush.

NGS provides a service that every oil and natural gas well needs.  You can’t operate without their products.  With high natural gas prices more and more wells are going to be opened.

The company announced their earnings last week.  They crushed the estimates, growing net income by 32%.

I’m expecting more of the same in the coming months. 

Trade Details:

Option Ticker Symbol:	NGSGF
Underlying Stock Symbol:	NGS
Current Bid-Ask Price:	$1.05-$1.35
Option “Buy Up To” Price:	$1.75
Break-Even On Stock At Expiration:	$31.75
Maximum Risk Per Contract:	$175

Exit Strategy:

NGS is trading at 26.53.  We really only have one resistance level to deal with, 29.70. After that we’ll be at new highs. So the psychological $35 level will come into play. Support levels are 25 and 23.

Chart:

Category: EOT Trade Alert