Monday's Commodity News To Trade On

by: Matthew Smith

Commodities are once again under pressure as China has revised its GDP growth rate down to 7.5% on the heels of slower exports. This is pushing oil prices lower and gold and silver are under pressure as well. We also noticed that China's auto sales are lower as well, their lowest in 7 years as a matter of fact. We are cautious here but will continue to pick our spots for entry points on these pullbacks for our favorite plays.

Looking to Asia we see the exporters down, but some strength in the dollar economies of Australia (down 0.23%) and New Zealand (up 0.36%). As we look at Europe it is essentially all red, leading us to believe today may be rough.


Prices are lower this morning based on the revised China numbers we discussed earlier. Iran has shifted to the back pages of the news, but we fully expect that story to once again surface in another news cycle as these events never just quietly go away. Revisiting Kodiak Oil & Gas (NYSE:KOG), we will continue the stop at the $9.50/share level. It is a stock we like, but right now it might be warranted to take profits, let the stock regroup and hopefully move back in at lower prices for another move upwards. We will have to wait to see if we cross below that level, but all indications this morning are that we will, and if so we will be happy to move to cash for a while.

Gulfort Energy (NASDAQ:GPOR) had another pullback on Friday and we found ourselves buyers at those levels. We would need another significant pullback to be buyers again, so right now we are holding tight. Our other Utica play, EV Energy Partners, LP (NASDAQ:EVEP), has been quite strong lately. They are once again on the correct side of $70/share and we think the next two quarters will be quite important for this one. As has been the play all along, we will buy if this falls into the $63-65 range and $68ish if the market is strong and it pulls back. So far this has worked, so we will continue until it does not.

Gold & Silver

We see both of the precious metals lower this morning, and no surprise, as lower growth takes away the inflation trade and it is hardly time to consider the Armageddon trade with the growth we do have and Europe seeming to have solved their short-term issues. Gold is trying to find a base, having fallen through the $1710/ounce level and then the $1700/ounce level earlier this morning. Currently we are bouncing off of the $1695/level and will be interested to see where prices move as the big traders in New York begin trading today.

Silver is also under pressure this morning as it broke through the $35/ounce level on Friday, and continues lower in early trading. Like gold, silver is bouncing off of its lows and is moving a bit higher off of the $34/ounce level. We continue to hold our physical lots of both gold and silver.

Natural Gas

For those who are trading natural gas, temperatures are getting colder here in the Eastern United States. The colder temperatures mixed with the warmer weather which was already here can most certainly be blamed for the deadly tornados which have crossed the country, but the real point is that lower temperatures should lead to higher natural gas utilization. We are holding steady in our positions, but as previously stated, we would only play this area via Chesapeake Energy (NYSE:CHK) whose stock could see 20% upside with a rebound in natural gas prices.


We see this developing as the trade for 2012 right now as global draught, blizzards and floods wreak havoc on the food supplies. Bloomberg has a good article out this morning (see here) discussing the agricultural trades and how bullish the market is on this area. We remain bullish the potash producers, and right now would look to Potash Corp of Saskatchewan (NYSE:POT) if adding to the sector.

Disclosure: I am long GPOR, EVEP.