Options Trader: Thursday Morning Ideas

 |  Includes: ABX, INTC, TSO, VLO
by: Philip Davis

I am in a GREAT mood today!

Tesoro Corp. (NYSE:TSO) missed! I knew they would miss (see last 50 posts!) and I knew I would regret being forced out of my $120 puts yesterday, but we redeployed the capital to great effect on longer puts and a spread (thanks OPtrader!). Business Week has a nice article about the refiners which follows up nicely on my theme of, "If you make money every time your refinery catches fire do you invest in fire extinguishers or matches."

I'm not going to gloat about TSO until it goes below $110, where I first started saying it was totally out of control, but hopefully I'll be gloating at the open! This one may surpass International Business Machines Corp. (NYSE:IBM) as our biggest turnaround victory of the year. But, as I said yesterday, I will be thrilled to get my money back, and we would all do well to remember that this morning...

Productivity was up 1.7% for Q1 and that's a good thing. Jobless claims went down. It's OK for wages to go up if the workers are more productive (attention France!), so I see this as a great thing for the economy, and it eases concerns about wage inflation.

The Asian markets that were open as Australia, Singapore, Malaysia, Indonesia and New Zealand rose to records but, to some extent that may be due to the lack of investment opportunity in the much larger Chinese and Japanese markets. Money never sleeps and it gets very restless when it has nowhere to go!

Rent a Rebel 03 05 2007Europe's ENI S.p.A. (NYSE:E) must have drawn the short straw as our predicted Rent-A-Rebel attack that hit just about 3am, just in time for the open of European trading. This was the second time in a year that workers have been kidnapped from this platform as none of the $8,981,305,000 in profits the company made last year could be spared for a guard (or even a sturdy lock on the door).

Obviously (see picture) no oil platform in the middle of the ocean could fend off an attack from a ferocious rebel attack, as their outboard motor putters up to the rig at speeds of up to 17 miles an hour! If only Luke Skywalker had had such an easy time attacking the Death Star. How could a company with $88B in annual revenues possibly defend itself against a dozen armed men as they climb 100 feet up from sea level? ATTENTION MSM -- WAKE UP TO THIS SCAM!!!

Royal Dutch Shell (NYSE:RDS.A) joined the global profit party by offsetting higher costs and lower production by simply charging you MUCH, MUCH more money.

European stocks were mixed this morning as rising crude put a damper on the market, but the fundamentals are going to get crude and I doubt natural gas inventories will save them this morning. ZMan predicts a withdrawal in gas of 65 to 90Bcf, but I'm going to take the under this morning. ZMan saved our day yesterday with his very brilliant call to hedge TSO with Valero Energy Corp. (NYSE:VLO), so mega-kudos to him!

Intel Corp. (NASDAQ:INTC) should give tech a good boost at the open with analyst day already off to a very positive start and expectations for the year being raised. I don't know why I have no INTC in my folder, so I'm back in the Jan $22.50s at .50 (maybe a bit more at the open). We should have a good open at least, but I am still stopping out when I have to:



Day's Move

Must Hold

Comfort Zone

Break Out

Next Goal

Dow 13,211 75 12,468 12,600 13,000 13,500
Transports 2,874 32 2,825 2,900 3,000 3,250
S&P 1,495 9 1,430 1,460 1,500 1,550
NYSE 9,718 78 9,218 9,465 9,600 10,000
Nasdaq 2,557 26 2,454 2,500 2,600 2,750
SOX 498 4 477 490 500 560
Russell 828 12 803 820 850 900
Hang Seng 20,681 293 20,200 20,600 21,000 22,000
Nikkei 17,394 closed 17,400 17,500 18,300 18,500
BSE (India) 14,078 205 13,200 14,000 14,725 15,000
DAX 7,446 -9 6,900 7,000 7,400 8,000
CAC 40 5,987 -2 5,650 5,800 6,000 7,000
FTSE 6,511 26 6,325 6,450 6,600 7,000
Click to enlarge

US Markets 03 05 2007 Chart

It's still up to the transports, which need an oil break below $63 to get it in gear. Of course the S&P trumps the deck at 1,500. Without that mark being met, nothing the Dow does is going to be of any real consequence. Happy Trading's chart of the day shows us the channel on the SPX:

SPX 03 05 2007

With TSO and Sunoco Inc. (NYSE:SUN) taking nice hits today (Halleluyah!) my macro premise is that they are going to decide that it's time to start refining some crude and selling it. While this may seem like an odd way for a refiner to make money, it has worked in the past, so I will predict right now, a week in advance, a build in gasoline next week. Oil faces a CRITICAL test at $63, and has a long way to go down if it fails there.

We're keeping a close eye on the dollar at 82 and gold at $670, but none of that will bother Tuesday's selection, Barrick Gold Corp. (NYSE:ABX), who is performing like a champ and should be challenging $30 regardless of gold's move.

Have a good day today but let's be careful -- with Japan closed we may run out of gas!

Read all of Phil Davis's articles on Seeking Alpha