“Armchair Trader Series” Recommendations
- Week Beginning -
Monday, April 09, 2018

by Ian Harvey

IMPORTANT NOTE: This is a recommendation and individual members can use their own discretion as to when to enter or exit!

You may also wish to read Stock Options Made Easy Trading Philosophy

Option Trade – ConocoPhillips (NYSE: COP) Calls

Wednesday, April 11, 2018

** OPTION TRADE: Buy the COP MAY 18 2018 65.000 CALL at approximately $1.25. Place a pre-determined sell at $2.50.

Also include a protective stop loss of $0.50.

ConocoPhillips (NYSE: COP) is the largest independent oil producer in the world, and its shares have performed relatively well as of late. The company enjoys incredible competitive advantages in holding high quality assets. Also, ConocoPhillips has an incredible competitive advantage in holding some of the highest quality oil producing assets in the industry.

To summarize COP’s assets, they have an average breakeven cost of under $40 WTI, and can continue production for at least 20 years with minimal capital spending, according to CEO Ryan Lance. The company's assets have the lowest breakeven cost in the industry, and can sustain current production rates for decades.

And now, that oil prices have started jumping back up toward $66 per barrel as observed on Tuesday as news leaked from various OPEC delegates that Saudi Arabia is looking for ways to push oil prices up toward $80; means great news for energy stocks like ConocoPhillips because higher oil prices tend to lead to wider margins.

COP has seen its stock price pushed above its prior 52-week high of $61.32, and is likely to be just the beginning of a rally much higher. Expect the stock to continue climbing up toward longer-term resistance at $64 in the run-up to the company’s earnings announcement on April 26, before market open. The advantage of buying the $65 strike calls is that, as the out-of-the-money option should see a nice increase in implied volatility and extrinsic value as the price of the stock gets closer and closer to it.

Influencing Factors

Recently, ConocoPhillips closed on a $250 million sale of assets in the Permian Basin area. Using this money, COP is buying acreages in Louisiana and Canada, and will start drilling in 2018.

This is good news as management looks to sell some of its unused assets at very high prices. In the same time, COP is using the money and looking to grow production.

ConocoPhillips reported its EPS in the last quarter as $0.45/Share. For the current quarter, 19 analysts are projecting a mean EPS of $0.70/share. Analysts believe that the company has the potential to earn average revenue of $8.88 Billion for the current quarter.

The stock’s current statistics gauging by the stock candle is that it is BULLISH with HIGH volatility. ConocoPhillips has a 20-Day average volume of 8.34 Million. According to today’s trading volume ConocoPhillips is ABOVE its 20-Day Avg. volume with the stock showing ABOVE Abnormal volume in the past 150 days.

Moving average convergence divergence (MACD) shows that the stock is on a PRICE RELATIVITY trend. The trend for the past 10-days shows that the company was in BULLISH territory while an analysis of the last 40-Day trend shows a BULLISH signal. The 100-Day trend also shows a BULLISH trend as well.

ConocoPhillips declared that its board has initiated a stock buyback plan on Thursday, February 1st that allows the company to buyback $500.00 million in shares. This buyback authorization allows the energy producer to purchase shares of its stock through open market purchases. Stock buyback plans are typically a sign that the company’s board believes its shares are undervalued.

Analysts and Hedge Funds Opinions

Several other equities analysts have recently commented on the company…..

  • Morgan Stanley raised their price objective on ConocoPhillips from $48.00 to $65.00 and gave the company an “equal weight” rating in a research note on Wednesday, January 24th.
  • Cowen set a $70.00 price objective on ConocoPhillips and gave the company a “buy” rating in a research note on Thursday, January 18th.
  • Finally, Barclays raised their price objective on ConocoPhillips from $59.00 to $72.00 and gave the company an “overweight” rating in a research note on Friday, February 2nd.

One analyst has rated the stock with a sell rating, seven have assigned a hold rating, fifteen have given a buy rating and one has given a strong buy rating to the company. The stock presently has an average rating of “Buy” and a consensus price target of $68.75.

Institutional investors that have recently made a change to their positions in the stock….

  • Lombard Odier Asset Management USA Corp bought a new stake in shares of ConocoPhillips during the fourth quarter valued at approximately $11,478,000.
  • Toronto Dominion Bank increased its position in shares of ConocoPhillips by 16.1% during the second quarter. Toronto Dominion Bank now owns 616,392 shares of the energy producer’s stock valued at $27,092,000 after acquiring an additional 85,538 shares in the last quarter.
  • Korea Investment CORP increased its position in shares of ConocoPhillips by 32.8% during the third quarter. Korea Investment CORP now owns 1,026,000 shares of the energy producer’s stock valued at $51,351,000 after acquiring an additional 253,600 shares in the last quarter.
  • Finally, Royal Bank of Scotland Group PLC bought a new stake in shares of ConocoPhillips during the fourth quarter valued at approximately $21,216,000.

Harvey’s Options Volatility Indicator


ConocoPhillips has a 52 week low of $42.26 and a 52 week high of $61.31. The stock has a market capitalization of $69,640.73, a P/E ratio of 98.28, a price-to-earnings-growth ratio of 1.75 and a beta of 1.22. The company has a current ratio of 1.76, a quick ratio of 1.64 and a debt-to-equity ratio of 0.56.

Option Trade - Facebook Inc. (NASDAQ:FB) Calls

Monday, April 09, 2018

** OPTION TRADE: Buy the FB MAY 18 2018 170.000 CALL at approximately $4.00. Place a pre-determined sell at $8.00.

Also include a protective stop loss of $1.60.

Facebook Inc. (NASDAQ:FB) security woes are still to be resolved; but recent analyst commentary and market indicators suggest the worst may already be over.

Deutsche Bank is “cautiously optimistic the bottom is in,” analyst Lloyd Walmsley wrote in a note to clients. “A year from now, if not sooner, this episode will have been a uniquely compelling buying opportunity in the mega cap Internet space.”

Even though Facebook shares are still down 14 percent since the Cambridge Analytica data breach was revealed last month, the options market is much more optimistic that the initial panic selling has subsided. Short-term volatility, a measure of uncertainty in the stock’s value over 10 days, has fallen 10 percent from its peak on March 29.

Also, technical analysis suggests that the bottom was put in on March 26, when Facebook staged a vicious intraday reversal on massive volume. The stock has found support at $150 a share, testing that level five times in seven days. Rich Ross, a technical analyst with Evercore ISI, said last Monday that the “bullish weekly reversal on critical support makes the stock a strong buy” with a floor at $149.

Reuters's David Shepardson writes that Zuckerberg is scheduled to meet with various members of Congress on an individual basis today, before formal testimony before the U.S. Senate Judiciary and Commerce committees on Tuesday, and the U.S. House Energy and Commerce Committee on Wednesday.

In advance of those meetings, Zuckerberg announced on his page this morning that the company is forming an "an independent election research commission that will solicit research on the effects of social media on elections and democracy.

Analysts and Hedge Funds Opinions

KeyBanc's Andy Hargreaves reiterates an Overweight rating and a $245 price target, writing that "despite significant media coverage and investor concern, checks with ad agency executives suggest spending on Facebook remains strong and is likely to grow in line with or ahead of our estimate of 41% y/y constant currency growth in 1Q."

And Jefferies analyst Brent Thill reiterates a Buy rating, while cutting his price target to $215 from $230, noting that Facebook users aren't leaving the platform in droves. He did a survey of 750 US Internet users and found 60% or more use the combined Facebook and Instagram "more often, or the same as a year ago," which "gives us further confidence that consumers remain on the FB platforms despite recent turmoil."


FB continues to seek support, and a positive showing by Zuckerberg before Congress could be exactly what the stock needs to find further support and start to erase more of its recent losses.