The historic charts for Randy Eresman couldn't be more vicious. As president of one of Canada's greatest companies, he decided to split the company in two to release shareholder value in the fall of 2009.
While Encana continued to slide after the split on low Natural Gas prices, Cenovus made it's 2012 high as Encana made it's low in the Spring of 2012. Cenovus has making lower highs for 2 years. Encana was making lower 52 week highs every year as well. It has been a tale of top left to bottom right for these two stocks in 2013. Could 2014 finally turn the page on this story?
Let's look at the Encana chart above. It has broken the downward slope of the last 3 years and in the last 2 months has started to break out from the $17-$21 trading range. Let me call that price action in the range of $17-$21 making a base. It is now at 52 week highs. It is testing the highs of October 2012 up around $24.
Cenovus bounced off it's support resistance line and is now challenging the 2 year downward trend line. With $WTIC above $100, and great production growth at Cenovus, we would expect this stock to get some love. Now look at the Daily of each below.
Encana is now moving into the top quartile of best price action stocks on the $TSX. We can see that by looking at the SCTR. It is behaving better than 80% of the $TSX stocks. That is very bullish for the stock and Encana could be one of Canada's top performers with a bid under Natural Gas and investors moving into the stock. It looks a little extended here, but strong stocks can look extended for a while.
I have not plotted the SCTR for CVE.TO as it is still barely above a downsloping 40 week moving average. It currently sits right at resistance. It looks like Cenovus is building the base ($28.25 to $31.25) that Encana built before it got its mojo. Stay tuned. Maybe the stars will finally align for these two companies and make them the star performers.
Good trading,
Greg Schnell, CMT
