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Storm The Castle Stock Of The Day: Encana (ECA)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Encana (ECA) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Encana as such a stock due to the following factors:

  • ECA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $69.2 million.
  • ECA has traded 161,846 shares today.
  • ECA is trading at 5.47 times the normal volume for the stock at this time of day.
  • ECA crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in ECA with the Ticky from Trade-Ideas. See the FREE profile for ECA NOW at Trade-Ideas

More details on ECA:

Encana Corporation and its subsidiaries engage in the exploration for, development, production, and marketing of natural gas, oil, and natural gas liquids in Canada and the United States. The stock currently has a dividend yield of 1.6%. ECA has a PE ratio of 31.6. Currently there are 6 analysts that rate Encana a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for Encana has been 5.4 million shares per day over the past 30 days. Encana has a market cap of $13.1 billion and is part of the basic materials sector and energy industry. Shares are down 2% year-to-date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Encana as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and generally higher debt management risk.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 35.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 115.1% when compared to the same quarter one year prior, rising from -$1,244.00 million to $188.00 million.
  • ENCANA CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, ENCANA CORP swung to a loss, reporting -$3.79 versus $0.15 in the prior year.
  • ECA has underperformed the S&P 500 Index, declining 9.02% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • Net operating cash flow has decreased to $935.00 million or 18.12% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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