As regular readers know, I recently traded oil futures from the low $40s into the low $50s before making a fortuitous exit at $53.50. Since the sale, I have been itching to increase my energy exposure, and although crude futures have retreated back under $48, I am reticent to re-enter that trade just yet. Instead, I decided to take a look at some of the smaller explorers and drillers in order to get a bit of a percentage boost should the energy and equity rallies take the expected turn higher.
I found a fine candidate in Precision Drilling Trust and decided to purchase some shares this morning. Unlike my other Canroy trades, the PDS trade is purely a technical play. The company somehow failed to make money even when oil was soaring above $100, so I do not consider the position to be a keeper. Here is the setup:
The rules on this trade are simple. If the shares break below $2, bail. If they hit the pivot at $6, take profits and dance in the streets. As always, if the technical picture changes in any material way before either the stop or target are hit, I walk. Only stay in a trade as long as you understand the situation.