Posted on September 29, 2022
We never liked those schoolyard stooges who relished the opportunity to jump on us while we lay on the ground after a stumble.
But when real life hands you a bowl-him-over opportunity like this one, you don’t balk.
Today’s trade is based on the integrated O&G machers at Canada’s Suncor Energy (NYSE:SU).
Oil, as you know, has been weak over the last three months, and Suncor has been even weaker.
Analysts, too, have revised their earnings estimates for the company LOWER of late – not a promising sign.
Moreover, S&P recently lowered the company’s credit rating to BBB and offered a NEGATIVE outlook on SU debt – its second such cut in the last three years.
That said, fundamentals are reasonable, even if they’re not as good as the rest of the peer group.
Take a look –
All told, we see challenging times for the bulls.
Now look at the chart –
Will they succeed?
We don’t believe so.
But price may play in the 27-30 range until a decisive selling event ensues.
And then THIS will make you a boatload –
A Jew and His Gold recommend you consider selling the SU December 16th 29/32 CALL spread* for a credit of $1.05 (2.45/1.40) and buying the SU December 16th 29/27 PUT spread** for $1.10 (3.10/2.00). Total debit on the trade is $0.05.
Rationale: we’re looking at a maximum take of $1.95 on a nickel expended. That’s 3900%.
Max loss is $3.05 (difference between the CALL strikes plus the initial debit).
Breakeven on the affair is $28.95, and price opens today at $28.46, meaning we’re already $0.49 in-the-money. And that’s a pleasure (thanks to very tight spreads).
The full 3900% purse is ours on a decline of just 5.1%.
And we have 80 days to get there.
Repent, good Jews and Noahides. The world is in the docket. And judgment looms.
This is not the time to let up.
Many happy returns!