ECA Encana update

A week or so ago it looked like natural gas was, perhaps, bottoming. Earlier we recommended ECA, albeit tentatively, as a buy simple because of the upside potential (see earlier blogs). Here are the charts;

eca apr 2012 beca apr 2012 s

Back in December it was still possible that the wedge structure that  was still unfolding could have taken the stock to as low as $15. It did not do that and stopped in the $17+ range. Since then it has been a rollercoaster , most probable a wave 1 up followed by a (very normal) deep wave 2, which means that we are presently in 3. The alternative would be a corrective a-b-c rebound than must , in any case, go to $22 (wedges are almost always fully retraced). Given the clear count this alternative is not at all probable.   Considering that this entire C wave started at $34 and ended roughly at $17 it would not be surprising if the first bull-leg up would travel at least 38% of that which is $6.50 which would take the stock to $24. A very common next target is wave 4 of 3 (a triangle) which would take the stock to $26.

If there is a slight pull-back Monday morning this is an excellent buy for a gain of 10 to 20% with very little risk.