Novice Trade: Range Resources

The Trade: Buy 1 RRC March 16 call for 1.15 points. Range Resources is described on Yahoo Finance as follows: Range Resources Corporation operates as an independent natural gas, natural gas liquids (NGLs), and oil company. It engages in the exploration, development, and acquisition of natural gas and oil properties. The company holds interests in developed and undeveloped natural gas and oil leases in the Appalachian and North Louisiana region of the United States. It owns and operates 4,526 net producing wells and approximately 899,000 net acres under lease in the Appalachian region; 392 net producing wells and approximately 187,000 net acres under lease in the North Louisiana region; and 337 net producing wells and approximately 209,000 net acres under lease in the Texas Panhandle, as well as in the Anadarko Basin of Western Oklahoma, and the Nemaha Uplift of Northern Oklahoma and Kansas. The company markets and sells natural gas to utilities, marketing and midstream companies, and industrial users; NGLs to natural gas processors or users of NGLs; and oil and condensate to crude oil processors, transporters, and refining and marketing companies. As of December 31, 2016, it had proved reserves of 12.1 trillion cubic feet of natural gas equivalents. The Marcellus Shale area is the big region where RRC is a major player. For more in-depth detail about the Marcellus region see this. For the past wild, if not crazy 52 weeks of trading, RRC has seen a low of $15.33 and a high of $36.40. That high was literally one year ago, while the low was last week! RRC is expected to report earnings this quarter of $0.19 per share, a $0.04 decline year over year. For 2017, RRC is projected to post net earnings of $0.52 per share. Thus, the forward P/E for RRC is around 23. As for the book value of RRC, that is where the company shows potential and promise as it is near $23 per share. Key to that value increasing will be how natural gas fares as the years progress. But do note that natural gas usage worldwide is increasing. And with worldwide pollution an ever-growing problem one big answer to that problem is using natural gas instead of burning coal and oil. And just yesterday the Wall Street Journal reported that Saudi Aramco, of all entities, is inquiring about buying a U.S. natural gas company. In particular, it is looking at shale energy companies. My, how things can and do change. Technically, RRC has a one-year stochastic and RSI (relative strength index) currently in a pattern I label as floundering. In other words, RRC's stochastic and RSI are hovering around the nadir of their respective ranges. A bull might say that the only path to move is up, and remind themselves that Columbus used charts. If so, expect little resistance as long-side sellers are probably sold out, with tax-loss selling being their motivator. The shorts who are at 12%+ of the RRC float remain in play. But they are buyers if RRC takes off to the upside. Note that the options activity in RRC over the past few days to week has picked up, if not in size. That activity for me is a canary chirping, although such a spike in options activity is a lock bet. The trade tactic I prefer now for RRC is the bullishly biased, near-the-money long call shooter expiring in March. This is a very high-risk trade for various reasons (poor technicals, turnaround potential a must, and natural gas must turn upward in price and demand). Thus, best to use only highly discretionary capital for the trade. The trade is as follows: Buy 1 RRC March 16 call for 1.15 points. The suggested target to close for a gain is a bid of $1.65 and the suggested stop loss target is a bid of $0.65. Best to scale into the position using limit orders.

Novice Trade: Range Resources

Consider this RRC bullishly biased, near-the-money long call shooter expiring in March.

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