Analysts, Options Traders Love This Lesser-Known Energy Stock

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

by Patrick Martin

Published on Jun 5, 2018 at 12:20 PM
Updated on Jun 5, 2018 at 12:20 PM

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.

START YOUR SATURDAY SMARTER.


The best of Schaeffer's market analysis in a 5-minute weekly read.


 
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


IRA/401K Investment Guide: 2019 Stock Market Crash
Use gold to protect any IRA, 401(k), or retirement account from a looming financial crisis.
Boeing Headwinds Hit SPR; Healthcare Stock Falls on CEO Exit
Looking at three of the worst stocks in today's trading
2 Analysts Praise Chipotle Stock Before Earnings
CMG has added 96% in 2019 already
IRA/401K Investment Guide: 2019 Stock Market Crash
Use gold to protect any IRA, 401(k), or retirement account from a looming financial crisis.