Analysts, Options Traders Love This Lesser-Known Energy Stock

Encana stock just pulled back to its 60-day moving average

Managing Editor
Jun 5, 2018 at 12:20 PM
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Energy stocks have made headlines in recent weeks amid fluctuating oil prices. Lesser-known oil-and-gas concern Encana Corp (NYSE:ECA) has had an equally volatile year, but recently pulled back to a trendline that could have bullish implications.

More specifically, Encana stock recently fell to its 60-day moving average. In fact, over the past two years, when ECA comes within one standard deviation of this trendline, the security sports an average 10-day return of 6.04%, and has been higher 86% of the time, according to Schaeffer's Quantitative Analyst Chris Prybal.

ECA Daily Stock Chart

It's been a up-and-down year for ECA, which at last check was up 2.5% to trade at $12.44. Since touching a two-and-a-half-year high of $14.31 on Jan. 11, the $14 level has acted as a ceiling, turning away a breakout attempt last month. Year-to-date, the stock has shed nearly 7%.

Despite the choppy price-action, analysts are enamored with the equity. All 18 of the brokerages covering Encana rate it a "buy" or "strong buy," and its consensus 12-month price target of $16.49 is a 33% premium to the stock's current perch. 

The attitude is equally as bullish in the options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculative players have bought to open 11,185 calls in the last 10 sessions, compared to a meager 62 puts. The resultant call/put volume ratio ranks in the elevated 94th annual percentile, indicating a much healthier-than-usual appetite for long calls over puts during the past two weeks.

Digging deeper, the July 13 and 14 calls saw the largest increase in open interest during this time frame and almost all of the activity was of the buy-to-open kind. As such, traders are hoping for the shares to rally past the strikes in the weeks ahead.

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