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Tue, June 6 at 7:00PM ET

Trade of the Day: U.S. Silica Holdings (SLCA)

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We are opening a new bullish trade on U.S. Silica Holdings (NYSE:SLCA). SLCA went through a rough patch — along with the rest of the market — in February, but it got hit especially hard when it released its fourth-quarter results showing an earnings miss and lower-than-expected first-quarter guidance.

This news sent the stock below support at $28, but, since that time, SLCA has stabilized and is now challenging that same $28 level as resistance. We expect the stock to break up through this level and to begin filling the gap that formed on Feb. 21 as the company gets ready to release its first-quarter results on April 24, before market open.

SLCA has a few things going for it. First, crude oil prices have been rising steadily during 2018, and with the recent breakout in crude above $66 per barrel, demand for fracking sand is likely to increase.

Second, we believe the stock was oversold in the aftermath of its fourth-quarter earnings. Yes, the company missed estimates, but it seems that the general bearish sentiment in the market pushed the stock down too far. We are expecting value-traders to look at SLCA as a great low-cost trade, especially once the company is able to complete its $750 million acquisition of EP Minerals.

‘Buy to open’ the SLCA June 29 Call (SLCA180615C00029000) for a maximum price of $1.90.

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