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Buy This Natural Gas Stock on a Pullback

Encana issued long-term buy signal but is somewhat overbought at current levels


Encana Corp. (NYSE:ECA) — This North American energy producer is one of the largest natural gas producers in the world. Its operations are entirely in Canada and the United States, and include the transportation and marketing of natural gas, oil and natural gas liquids.

Its systems are very cost efficient, and thus Encana is able to be profitable even when natural gas prices fall below $2 as they did at the beginning of this year. As the economy converts to the use of clean natural gas as an energy source, ECA should be a prime beneficiary of the increased demand.

Technically the stock broke from a bear market in January, while forming a huge saucer formation that has developed into a bull channel. The 50-day moving average crossed through the 200-day in June. This is called a “golden cross,” and it is a strong long-term buy signal.

ECA is somewhat overbought at the current price and should be purchased on a pullback under $21. Its trading objective is $26, but long-term investors should buy the stock as a cornerstone investment in the natural gas industry. ECA pays a quarterly dividend of $0.80 for a 3.6% yield.

Trade of the Day – Encana Corp. (NYSE:ECA)
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Trade of the Day Chart Key

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