EOT trade alert April 4, 2014

April 4, 2014

Trade Alert:

Buy APA May 2014 $85.00 Calls at $2.65 or better

Company Background:

Apache (APA) is an independent energy company. They explore, develop, and produce crude oil and natural gas liquids.

Short-Term Catalyst:

APA has been an underperforming stock over the last few years. They’ve been dogged by slow production growth and issues with some of their projects in Egypt.

However, APA has a new strategy.

APA is cutting costs and refocusing on their most profitable opportunities. They’re selling off their foreign assets and focusing on the profitable US onshore business.

The asset sales in Canada, Argentina, and Egypt have allowed Apache to reduced their debt by $2.6 billion and stockpile $1.9 billion in cash. And true to their plan, APA is now the most active driller in the East Texas Eagle Ford.

In short, APA’s new strategy has put them in position to grow their production and profitability going forward.

What’s more, APA’s chart is extremely bullish.

The stock recently formed a bearish head and shoulder pattern. But the setup failed to produce the usual drop in the stock price.

In other words, APA just completed a failed head and shoulders pattern. This type of chart pattern typically leads to a quick move to the upside.

Let’s grab call options on APA now to profit from a quick move to the upside in the weeks ahead.

Trade Details:

Underlying Stock Symbol:	APA
Current Bid-Ask Price:	$2.50 – $2.55
Option “Buy Up To” Price:	$2.65
Break-Even On Stock At Expiration:	$87.65
Maximum Risk Per Contract:	$265

 

Exit Strategy:

APA is trading at $85.56 per share. Resistance levels will be at $90.00 and again at $94.00. Remember, we want this stock to move higher. Support levels will be at $80.00 and $77.50. Conservative investors should look to exit at the first support or resistance level. Aggressive investors may want to hold for a bigger move.

Chart:

 

Category: EOT Trade Alert