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The market is edging higher Monday morning after Exxon Mobil Corporation (XOM) reported its strongest quarter since Q3 2008. Oil stocks remain strong with the unrest in Egypt threatening to disrupt to global supply. In addition, the Chicago Purchasing Managers Index hit its highest level since 1988, showing significant growth in US manufacturing.

After months of takeover talk, Massey Energy Company (MEE) has agreed to a $7.1 billion buyout from Alpha Natural Resources, forming the second largest coal mining company in the US. The entire coal sector has surged on the news, with Patriot Coal Corporation up 5%.

Oil Rising

As mentioned, oil remains in focus as the unrest in Egypt continues unabated. To this point the government says there has been no disruption of supply through the Suez Canal, but its proximity to the protests is sure to cause some anxiety. The situation in Egypt does not appear to be coming to a halt anytime soon, and it could remain another cost driver in a sector already considered to have significant upside this year.

The most attractive stock in the group for us remains Schlumberger Limited. On a technical basis, the stock also looks good for a breakout above $88. Today, SLB touched that level before pulling off slightly, but expect it to break through in the coming days. Another strong stock in the sector is Halliburton Company (HAL), although it is a bit extended technically in this area.

China MediaExpress Could See Short Squeeze

China MediaExpress Holdings Inc. (CCME), a stock Scott Redler of T3Live.com has covered a few times for short term trades, has an interesting story. The company places television advertising on inter-city buses originating from Beijing. It operates within a growing transportation industry within China, which itself has a fast growing population and economy.

The stock has a substantial net float short, with many of said shorts presumably betting on the fact that CCME is a fraud. Based on the numbers alone, China MediaExpress seems to have massive upside, and given the amount of coverage the stock has received it seems highly unlikely there is any funny business going on with the books. In addition, the company has signed contracts with the like of Apple, Nike, and Sony. With some consolidation in the $19-$24 area, the stock seems poised to breakout to higher prices.

Will International Unrest Be Catalyst for Precious Metals?

With the shocking scenes from Egypt threatening to spill over into other countries such as Saudi Arabia and Turkey, we have kept a close eye on gold an silver. Both of these metals got a nice bounce on Friday as the market got hit and investors rediscovered the meaning of fear in today’s markets. After a weekend to digest the situation in Northern Africa, gold has been somewhat quiet in today’s trading while silver has stagnated after an early push.

The gold and silver trade has been without a headline cost driver over the past couple of months, and the global unrest could be the catalyst for a bounce back. The timing coincides with support in gold and silver after significant pullbacks. As we mentioned in the 2011 preview post, there are still other major hurdles for the global economy to overcome, and the turmoil adds another ingredient to the already radioactive stew. Even after the reversal bars from Friday, you can feel good about adding some gold and/or silver to your portfolio as a hedge of sorts.

*DISCLOSURE: Scott has no positions

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