That's no guarantee of further joy ahead, of course. But over the week I've dealt with a string of charts giving conflicting signals, so it's nice to have some agreement for a change.
The 55-day breakout (which coincides with the 20-day level) produced a Turtle Trading bull signal, requiring that traders using the system open a position immediately, no questions asked. My summary of the Turtle Trading rules can be found here.
The breakout is the third in a series within an uptrend that began May 16 from $17.54 and reached a swing high today of $27.97. It's a clear uptrend, with a high of $27.89 on Aug. 21, a higher low of $25.72 on Aug. 24, and a higher high of $27.97 today.
Western Refining is an independent crude oil refiner, headquartered in El Paso, Texas, that mainly serves markets in the Southwest and the mid-Atlantic region.
The retail group operates about 200 convenience stores and gas stations in Arizona, colorado, New Mexico and Texas under the names Giant, Mustang, Sundial and Howdy's.
Stock analysts are down on WNR, with a negative 14% enthusiasm score. However, it was negative 33% two months ago, so at least the trend is in a bullish direction.
Perhaps their negative assessment is due to the commodity nature of the business -- crude is crude and gasoline is gasoline. There's little anyone can do to differentiate the product from that of the competition. And the oil industry, of course, is extraordinarily exposed to economic shocks, both in the United States and abroad.
For all of that, Western Refining as some excellent financials: A return on equity of 56% with lon-term debt at 49% of equity, not low but not awful.
Annual earnings took a huge dive into negative territory as a result of the recession, and only in 2011 did earnings climb out of that deep hole. Four of the last 12 quarters have shown losses. Six have shown upside earnings surprises, and six have surprised to the downside.
There's little in the way of a trend to be seen in the quarterly earnings.
Institutions own 75% of shares, and the price is depressed. It takes only 26 cents in shares to control a dollar in sales.
All in all, the Western Refining financials are a contradiction: Growth stock returns with value-stock pricing, and earnings quirky enough to make the most hardened trader as skittish as a cat.
WNR on average trades 1.6 million shares a day and supports a wide selection of option strike prices, a few with four-figure open interest. The bid/ask spreads are narrow. The front-month at-the-money spread is only 7%.
Implied volatility stands at 40%, up slightly from the six-month low of 36% recorded on Aug. 17. Options are pricing in confidence that 68.2% of prices will fall between $24.70 and $31.10 over the next month.
Option volume is running 12% above its five-day average, with puts leading at 21% abov ethe average, compared to 6% above for calls.
Presently the fair-price zone runs from $27.65 to $27.95 and encompasses 68.2% of transactions surrounding the most-traded price, $27.82. The stock is near the top of the zone with two hours before the close.
Western Refining next publishes earnings on Oct. 29. The stock goes ex-dividend in October for a quarterly paying yielding 1.15% annualized.
Decision for my account: WNR was part of my Turtle Trading pool, so I opened a bull position shortly after the breakout. I played it as long call options expiring in December with a $25 strike price, selling for $4.17 per contract. That gives me about 4x leverage.
The chart structure is clearly showing an uptrend, and that analysis would also prompt me to open a bull position now.
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.