Play RIG Calls

The McCain Trigger

By Bryan Bottarelli
Tuesday, June 17, 2008 11:37 AM EDT
Tue, 17 Jun 2008 15:37:00 GMT

PLAY: Buy the RIG July 150 Calls (RIG GJ) at or under $5.50, good for the day.

Dear Bottarelli Research Member,

Although it’s not being covered in today’s financial media shows, The Washington Post reported today that Senator John McCain called for an end to the federal ban on offshore oil drilling. Although this is drawing fire from environmental groups around the country, McCain wishes to allow states to open vast stretches of the country’s coastline to oil exploration. After all, the Senator estimates that we have untapped oil reserves of at least 21 billion barrels in the United States, but a broad federal moratorium stands in the way of energy exploration and production. McCain wants the federal government to lift these restrictions. And no wonder. 80% of people in a new Washington Post-ABC News poll said that soaring prices at the pump are causing them financial hardship. So it goes without saying that oil and oil service stocks (particularly the drillers) will be voting heavily for McCain come November.

This policy change makes a strong case for the top oil driller like Transocean (RIG – NYSE). Rig owns and operates 139 mobile offshore drilling units, including 39 high-specification floaters, 29 mid-water floaters, 10 high-specification jack-ups, 57 standard jack-ups, and 8 ultra-deepwater floaters. From a chart perspective, the stock has been range-bound for most of June, bouncing back and forth between $145 and $150. News like this, once absorbed, could be the trigger that sends shares of RIG back above the $150 level, so let’s play this move using July calls now!

RIG

PLAY: Buy the RIG July 150 Calls (RIG GJ) at or under $5.50, good for the day. Place a protective stop limit at $3.00 and a sniper sell at $7.20.

At the same time, our current positions are all looking good. New 52-week highs on both STLD and COP are pushing our COP July 100 Calls (COP GT) and STLD July 40 Calls (RQL GH) into profitability, while a downside move on the DIA is helping our protective position in the DIA July 122 Puts (DAW SR) as well. Maintain all of these positions for continued upside.

Also, the dry bulk shipping stocks that I noted yesterday continue to blast higher today. Shares of Excel Maritime (EXM – NYSE) are putting in a strong two-day move (along with fellow shippers like DRYS and GNK), and this tells you that the shipping sector is far from a fad. There is underlying demand to support these stocks for a long time coming, so I’ll continue to follow this powerful sector for forthcoming trading opportunities.

EXM

Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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