Encana Still Has Gas in the Tank
On any given day, it’s easy to succumb to the news story that’s grabbing the headlines. When the market is weak, ostensibly because of some negative news or data point, it’s easy to succumb to the urge to sell all your stocks, take the cash and put it in a can, and bury it in the back yard.During times like that, the best tactic to take is to simply zoom out to a wider lens and get a fresh perspective.
Let’s do that with Encana (ECA)
Rather than get faked out of a strong stock on every little wiggle, check out the pattern on this weekly chart. After doubling in price between September 2004 and September 2005, the stock consolidated for more than a year in a symmetrical triangle pattern — lower highs and higher lows. A couple of months ago, ECA broke out and has advanced about 15% or so. Is the stock overbought? Well, RSI indicates that it is. But we saw a similar RSI back in late 2004, and that reading persisted as the stock ran from $25 up to the high-$50’s.
So, don’t let an overbought RSI make you bearish. The strongest stocks are persistently overbought. Stick with them until the pattern changes.
You can see a more detailed analysis of Encana in the Video Department of StockMarketMentor.com. To view that video, just click here.
Dan Fitzpatrick, President & Founder
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