MRO Finds Support

Enter Upside Calls Now

By Bryan Bottarelli
Wednesday, January 17, 2007 12:29 PM EST
Wed, 17 Jan 2007 17:29:00 GMT

Dear Bottarelli Research Member,

The American Airlines flight attendant said it best yesterday evening…

“Attention American passengers flying into Chicago: Do you know the mild winter you’ve been enjoying? Well it’s now over. Current temperatures in Chicago are hovering in the 20’s and are forecasted to stay that way all week.”

With a winter cold streak finally hitting the Midwest, it looks like winter will show up after all. But despite the rapidly falling temperatures, oil prices continue to trade even lower, as crude oil prices are trading just under $51 a barrel and are closing in on 2-year lows!

In my view, it appears like speculative and fast-action hedge fund traders have caused prices to drop too far, too fast — and the carry-over effect has pushed oil prices down to current levels. Buying oil anywhere close to the $50 level seems like a steal, especially if you can allocate enough time to withstand any minor market gyrations. And that’s exactly what I’d like to do today with Marathon Oil (MRO – NYSE).

MRO

As you can see by the chart, MRO peaked just under $100 in mid-December — and has since traded as low as $83. What’s important here is that MRO found support exactly at the 200-day moving average (noted in red) which serves are a very strong level of support. Let’s use the current oil price weakness to add some longer-dated MRO calls, capitalizing on reduced premiums and a possible snap-back oil rally sparked by frigid temperatures making their way across the country. MRO is a stock that can jump $5 very quickly, and I want everyone to be positioned to profit off this potential jump. Here’s the trade:

PLAY: Buy the MRO April 90 Calls (MRO DR) at or under $4.50, good for the day. Current bid/ask spread is $4.10 to $4.30. Place a protective stop loss at $2.90.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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