Option Trade of the Day: Continental Resources (NYSE: CLR)
The upward momentum from the second half of Friday carried over in to Monday with the main three indices gaining at least one percent on the day. The Dow led the way with a gain of 1.37% and that came after the index was the laggard last week.
[hana-code-insert name=’adsense-article’ /]One of the oddest observations from yesterday was that the utilities sector led the ten main sectors with a gain of 2.04%.Utilities don’t usually lead the charge on a day like yesterday.
For the second day in a row, my scans didn’t produce a single bearish signal and the number of bullish signals spiked from 32 to 80.
With no bearish signals on the night, the trade idea for today is a bullish one and it is on Continental Resources (NYSE: CLR).
The oil and gas exploration company has seen tremendous earnings and sales growth in recent quarters and that has helped drive the price higher.
We see on the chart that CLR nearly doubled from the July low to the January high. This has the stock tremendously overbought on the daily, weekly and monthly oscillators until a dip took them down. The stock seems to have found solid support at the $47.50 level after dancing around for several days. You could even argue that the two dips in February were a double bottom and now the stock will rally above the peak between the two lows ($55). I look for the stock to challenge the January high in the coming weeks.
Buy to open the April18 50 strike calls on CLR at $3.75 or better. These options expire on April 20. The stock peaked just above $57.50 in January and I think that is a fair target for this option. Based on the current price and giving a little wiggle room to get in to the trade, a move up to $57.50 would make these options worth $7.50 and that would be good for a gain of 100% in the next month or so.
— Rick Pendergraft
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