U.S. energy-services company Allis-Chalmers (ALY: NYSE) is currently up by more than 40% at the mid-point of today’s trading session. While our initial buy-signal on ALY shares back in late-December of last year proved early – I have been recommending that additional ALY shares be purchased at lower price-levels over the last six weeks in order to reduce the average cost-per-share basis. Last week, the ALY share-price reached a firm bottom at the $0.70 level and has since doubled to today’s interim peak of $1.45 per share.

Last month, I mentioned that we were beginning to see signs of an improved market for petroleum products in the United States – and now the early proof is in the numbers with oil’s dramatic price-rally. Oil is currently trading at the $47 per barrel range – or approximately 33% above price-levels of just two weeks ago. Finally, on national television last evening, Fed Chairman Bernanke stated that the economy is of course quite weak at present, but that there shall be signs that the economy is making its bottom later this year and that by early next year there shall be clear evidence that the recession is over and that strength, rather than weakness, will be the order of the day. I agree with his comments and clearly the market does as well with the rally now moving into its fifth straight session.

I remain confident that Allis-Chalmers will trade well above the $5 per share level in the coming quarters. If you have been following my ongoing instructions, you have by now successfully lowered your average cost-per-share basis on Allis-Chalmers with the purchase of additional ALY shares at lower price-levels.

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