Stay Long on EOG Resources (EOG) Stock

About EOG stock: Enjoy your profits, and cover your bases by raising your sell stops to your entry position.
By Bruce Kamich ,

NEW YORK (TheStreet) --We recommended buying Action Alerts PLUS holding EOG Resources (EOG) - Get Report on a dip toward $80, and we got that opportunity recently. Now that EOG has firmed nicely, we want to suggest that traders who took advantage of that dip raise their sell stops to your entry position.

I met renowned trader Victor Sperandeo maybe 25 years ago at a Market Technicians Association presentation he made in New York, around the corner from our offices on Wall Street. Trader Vic, as he was known in some circles, had a trading rule of never letting a profit run into a loss. That is why we suggest raising your sell stop.

In this chart of EOG, directly above, we can see our favorite technical studies moving in the right direction. EOG rallied over the September highs and had a dip or pullback that was bought. The On-Balance-Volume line is rising, telling us that volume is heavier on the days that EOG closes higher and suggesting accumulation. The 50-day simple moving average is rising, telling us that we are in an uptrend, mathematically.

Stay long EOG.

TheStreet Ratings team rates EOG RESOURCES INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate EOG RESOURCES INC (EOG) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.19, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for EOG RESOURCES INC is currently very high, coming in at 73.31%. Regardless of EOG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.21% trails the industry average.
  • EOG, with its decline in revenue, slightly underperformed the industry average of 33.1%. Since the same quarter one year prior, revenues fell by 41.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Net operating cash flow has significantly decreased to $887.37 million or 54.13% 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.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, EOG RESOURCES INC's return on equity is below that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: EOG

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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