It appears that commodities are in a holding pattern ahead of this fiscal cliff resolution. We are assuming that a resolution is reached at this time and view the current market conditions as ideal to add to current winning positions while also gaining exposure to names on the shopping list. It is our opinion that oil and natural gas along with the metals will be the way to play this fiscal cliff resolution and that is where we shall focus our attention at this time.
Oil & Natural Gas
Shares in McMoRan Exploration (MMR) took another pounding yesterday as shares fell $2.80 (22.49%) to close at $9.65/share on volume of 19.5 million shares after the company provided an exploration update on their activities. Investors were quite disappointed with the progress the company has made in the Gulf of Mexico on one of their wells which appears to have made little progress since the last update. This is a stock which we have avoided due to their exposure to the Gulf, and it is that exposure which heightens the risk for players in the area. There are great wells to be drilled there, but too many delays and potential delays coupled with political issues associated with the current administration in Washington, D.C.
Yesterday was a relatively calm day for Talisman Energy (TLM) however we did want to point out to readers that the stock did pop last Friday after briefly falling below the $11/share threshold. Based on the recent price movements here, we think that it is safe to say that Talisman is a buy as it approaches the $11/share area as it has already been beaten down and is probably undervalued at that level - assuming of course that oil and natural gas prices do not move dramatically lower. We are moving this back onto our watch list this morning to include in potential trading ideas moving forward should shares fall from their current levels at $11.69/share towards that support at $11/share.
General Moly (GMO) announced yesterday that it received the Water Pollution Control Permit from the state of Nevada for its Mount Hope Project. The permit was the final one needed for Mt Hope and officially completes the permitting process for the project. Shares jumped $0.26 (7.16%) to close at $3.89/share on volume of 373k shares. Investors can now look forward to the company finalizing the financing for the project in the near-term, that is assuming after all that the fiscal cliff does not cause any ripples in financial markets.
We have been watching coal intently since the failure of Romney to gain the required votes to seize the White House. Thus far we have remained on the sidelines as coal has drifted lower, but we are beginning to see some attractive trading opportunities which we may need to pull the trigger on. One which we discussed earlier was James River Coal Company (JRCC) which has since rebounded from where we thought it would bottom out. Yesterday shares closed at $2.74/share after rising $0.25 (10.04%) on volume of 4.3 million shares.
The next company we are watching is Alpha Natural Resources (ANR) which we have in the past traded via options. It was a two day trade using the weeklies, and we could see ourselves doing something similar in the next few days as shares have been trending back towards the $7/share level recently. If $7/share can hold, we think that the stock could see a 10% bounce higher, much like the bounce James River saw but on a smaller scale due to differentials in volatility. We are not making any moves today, maybe not even tomorrow but this is on our screen right now.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ANR over the next 72 hours.