Trade of the Day: Tesoro Corporation (TSO) Ready for a Leg Up
Tesoro Corporation (NYSE: TSO ) - This refiner and marketer of petroleum products in the U.S. is one of the largest in North America. More than half of its refining is done on the West Coast, since its primary market is there. The integration of a Los Angeles refinery in 2013 and continued rail expansion to that area from the Bakken shale zone leverages its asset base to a possible increase in future profitability.
The leverage gained from this expansion and asset integration with its limited partnership, Tesoro Logistics LP (NYSE: TLLP ), encouraged Standard & Poor's to indicate that an upgrade from a three-star "Hold" to a four-star "Buy" could be expected sometime "in the future."
But yesterday, analysts at Citigroup raised their price target from $92 to $102 per share, sensing the turnaround in the refining spread and the maintenance of current crude oil prices . Citigroup maintained its "Buy" rating on the stock.
TSO topped at over $120 last November before falling to under $70 in February 2016. From there it bounced to $93 in late March and then settled into a 10-point consolidation channel with support at about $73 and resistance at $83.
In September, the stock jumped from the support line to form a new consolidation pattern with support at its 50-day moving average (blue line) now at $79.89. The stock's momentum is building, and a breakout through the resistance line at $83 could result in a $10 trade to the March high at about $93. Therefore buy TSO on a "Buy-Stop" at $83 for a proposed gain of 12%.
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