Look for sunny days ahead with Suncor

Suncor's Q2 oil sands production soared 72 compared to a year ago, on capacity upgrades, production should exceed 350,000 barrels per day (bpd) by the end of 2009.

Further, oil sands is the driver here, with the focus being Canada's Athabasca oil sands region: oil sands require a larger investment and hence a higher price, but the substantial sands resources of Canada will play a larger role in oil consumption as the world's older, conventional oil fields continue to decline. And the above puts the focus on costs: SU's 2009 cash operating costs should average about $36-38 per barrel. With oil prices likely to average $60-65 in 2009 (and possibly higher), the oil math is running in SU's favor, to say the least. The First Call FY2009/FY2010 EPS estimates for SU are $1.10 to $2.51.

Technically, Suncor's chart is strong, perhaps in this case, slightly too strong. As noted, SU has more than doubled in less than a year, and some short-term institutional investors (IIs) will no-doubt take profits by year-end. Hence, the advice is to buy SU on a pull-back to $32-35, if given the chance. Keep in mind, however, that Suncor's shares may not retreat to that level.

Finally, the Sell/Stop Loss has been raised to $18, or to just below cost, from $12.

Stock Analysis: Suncor Energy is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in SU on a pull-back to $32-35; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your SU position before December 2009. Revised Sell/Stop Loss if you bought shares in this company: $18.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.