Add PBR Calls

Playing an Oil Bounce

By Bryan Bottarelli
Thursday, March 19, 2009 9:38 AM EDT
Thu, 19 Mar 2009 13:38:00 GMT

PLAY: Buy the PBR April 30 Calls (PBR DF) at or under $3.80, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $5.50.

Dear Bottarelli Research Member,

The after-effects of yesterday’s Fed actions are sparking commodities in a big, big way. In fact, this could be the trigger catalyst that pushes gold over $1,000 per ounce. It could also officially spark a new upside run in oil and natural gas.

Yesterday, we used the powerful upside move to lock in gains on our Royal Gold (RGLD – NASDAQ) and Oil Services HOLDRs (OIH – AMEX) positions. Today, I’d like to get repositioned in the oil sector by adding calls on Petroleo Brasileiro (PBR – NYSE).

PBR

PBR engages in the exploration, development, and production of oil, liquefied natural gas, and natural gas in Brazil — and they’re currently sitting on one of the largest oil reserves in the world. Since this deposit is in deep water off Brazil’s coastline, PBR needs oil prices above $40.00 to profitably extract it out of the ground. Lately, as oil prices have dipped, PBR’s stock price has suffered. But as oil prices are now moving north once again, PBR is in good shape.

In fact, China has already approved a $10 billion loan to Petrobras in exchange for a reliable supply of oil. In other words, China is telling PBR that they want to be their top customer, regardless of oil prices. With a stock chart that points to more upside movement combined with a new upside trigger in oil prices, let’s add PBR calls to our ledger now. Here’s the play…

PLAY: Buy the PBR April 30 Calls (PBR DF) at or under $3.80, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $5.50.

As always, I’ll follow-up throughout the trading session with more updates. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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