In this first chart of ETP, above, we can see the erosion in prices to the upper $30s, down from the upper $60s. There is a dead cross back in March when the 50-day moving average went below the 200-day moving average. Prices challenged the 50-day moving average a number of times, but prices continued to sink lower and every test of the moving average was an opportunity to sell. The volume of trading increased significantly at the end of September and the On-Balance-Volume (OBV) line has mostly been moving sideways (it recently made a new low).
In the bottom panel of this chart, above, we have our favorite leading indicator -- momentum. Prices have made equal lows in late September and recently. However, the momentum indicator has made a higher low, which is known as a bullish divergence. This "category" of divergence is when prices make an equal low but the indicator makes a higher low. The higher low tells us that something was different on the second decline, e.g. prices went down at a slower pace suggesting buying on a scale down. This kind of "action" can foreshadow a turn around to the upside.
This longer-term weekly candlestick chart of ETP, above, gives us some other "turnaround clues." First, while prices have broken below the lows of 2011 and 2012, they are back to old resistance from 2009, which should still act as support on the decline. Second, the volume is very heavy in recent months while prices have begun to stabilize. This suggests that buying has been as aggressive as the selling and old longs who are selling are being replaced by new longs who are buying. Last, the slow stochastic indicator is very oversold, meaning that prices have gone down too far/too fast. A market can get more oversold and stay oversold for a long time, but this too is a positive clue. A rally above $43 should get the ball rolling on the upside. Use a sell stop under the recent lows.
TheStreet Ratings team rates ENERGY TRANSFER PARTNERS -LP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate ENERGY TRANSFER PARTNERS -LP (ETP) 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 good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and poor profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has significantly increased by 104.27% to $860.00 million when compared to the same quarter last year. In addition, ENERGY TRANSFER PARTNERS -LP has also vastly surpassed the industry average cash flow growth rate of -25.83%.
- Along with the very weak revenue results, ETP underperformed when compared to the industry average of 36.8%. Since the same quarter one year prior, revenues plummeted by 55.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 40.57%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 77.27% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, ETP is still more expensive than most of the other companies in its industry.
- The debt-to-equity ratio of 1.30 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, ETP maintains a poor quick ratio of 0.86, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: ETP
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.