Trading Through Katrina

I have a list of 60 oil and gas companies on my screen. It will be instructive to watch variations in their performance at the open. In particular, which companies will benefit by providing repair services? I did some homework, but no repair operations stood out. So I'll wait and let the market separate the winners from the losers for me.

I have one hurricane play ready to go. It's the same one I kept ready during last year's hurricane barrage. Crawford & Co. (CRD.A - commentary - Cramer's Take) is the only pure claims-adjusting play that I know about, but I'm reluctant to mention the name because it's so thinly traded. Having been in the insurance industry for 20 years, I know adjustors made a fortune after Hurricane Andrew, heading down to Florida and providing services for carriers. In fact, most carriers ran out of adjustors during that period and paid premium prices to anyone they could find.

I also have one big problem this morning. I bought St. Paul's Travelers (STA - commentary - Cramer's Take) on Friday afternoon because it had a pretty pattern. The insurance carriers will get hit this morning, and I'm going to lose money. My plan is to sell it on a gap down of less than a point, or hold it for a bounce if the gap is greater than a point. Will the plan save me money? I give it just 50-50 odds.

8:38 a.m. EDT: Just grabbed a surprising premarket bid on St. Paul's Travelers at $44.25, down 50 cents from Friday's close. It looks like a bargain, but I'll see later if it was a good exit price. Here's one thing amazing me right now: Diamond Offshore (DO - commentary - Cramer's Take), with extensive Gulf operations, is bidding up over a buck even though it has shut down its local rigs.

9:08 a.m. EDT: This is unbelievable. Ivanhoe Energy (IVAN - commentary - Cramer's Take), a classic pump-and-dump stock, is up 8% in the premarket. As I suggested in Monday's column, I believe we're headed into an energy top/climax that will hold for the next two to four months.

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At the time of publication, Farley was long Sigma Designs, Apple Computer, L3 Communications, NRG Energy, Geron, Enersis and Global Industries, and short Per Se Technologies, although holdings can change at any time.

Alan Farley is a professional trader and author of The Master Swing Trader. Farley also runs a Web site called HardRightEdge.com, an online resource for trading education, technical analysis and short-term investment strategies. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Farley appreciates your feedback; click here to send him an email. Also, click here to sign up for Farley's premium subscription product The Daily Swing Trade brought to you exclusively by TheStreet.com.

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