Commodities are a mixed bag these days as they are attempting to find some direction. Oil seems to be getting weaker, but there is always the possibility of news out of Iran so it is more of a geopolitical play. Also with rumors of supplies being released from the Strategic Petroleum Reserve squashed now, we may very well see a rebound. The strong dollar is also not helping the case for commodities, but once the economy gets going and inflation becomes a concern rather than growth, expect fireworks, lots and lots of fireworks.
Sandridge Energy (SD) had a good day yesterday, rising to $8.31/share. We think if you can buy around the $8/share level for a trade that that would be the way to go. We would ride this out to see where it goes, and remember that this company is heavily into the oil part of the business and not saddled by the natural gas issues that other producers must face.
Kodiak Oil & Gas (KOG) is showing a bit of weakness here. We are approaching the $10/share level and we think we may initiate a stop on that at some point today for clients. It is all dependent upon the economic news, but we certainly do not want to sit idly as perfectly good gains dissipate.
Chesapeake (CHK) continues to amaze us. Investors have fled from this since the Utica discovery and it now trades at what they thought the holding would add to the company's market capitalization. It is ironic, but we are reminded that all resource companies trade lower during the 'proving' period. That knowledge gives us hope that we are right and the market is wrong in regards to Chesapeake. Hopefully investors are simply blinded by the natural gas exposure and unable to focus on the spectacular oily assets they possess for long-term expansion of reserves.
Gold & Silver
Silver found support at $32/ounce. The economic news yesterday only helped push it higher and for that we are thankful as we advised in purchasing silver early. Today we find silver trading at $32.35ish and notice that it has fallen off of the $32.50/level it was at earlier in the trading day.
Gold is also giving up most of its gains, and we are brought back to our earlier notions of owning gold in non dollar denominated currencies. It is surely doing better in those terms as the US$ moves higher, and the rest of the currencies move lower.
Copper rose smartly on the heels of yesterday's economic news (see story here). We are liking Freeport-McMoRan (FCX) less and Ivanhoe Mines (IVN) more. Both are operating in areas we have had trouble in before, but each mine has its own issues and we will remember to be cautious when investing in those areas. These are two of the best ways to play copper, and it is probably fair to assume that the geopolitical risk is factored in already.