We looked at the charts and indicators for Encana (ECA) last year, where we said, "Prices could see a $7 to $9 trading range for ECA for a while, but it looks like we could see an eventual rally to the $12-$13 area as our next long-term price target."
Prices actually rallied toward $14 and have retreated back down to around $8 before firming again. In the short run, prices are on the extended side, but longer term, ECA could retest and break above $14.
In this daily bar chart of ECA, above, we can see prices have broken the downtrend from January and established a new uptrend. ECA is trading above the rising 50-day moving average line and above the declining 200-day moving average line. The daily On-Balance-Volume (OBV) line made a low along with the price action in June and has also established a new uptrend with a higher low and a higher high. The Moving Average Convergence Divergence (MACD) oscillator crossed above the zero line earlier this month for an outright go-long signal. A cover-shorts buy signal occurred at the beginning of the month.
In this weekly bar chart, above, we can see ECA has rallied back above the declining 40-week moving average line. There is about three months of resistance in the $12-$14 area for ECA to work through, but it may not be a problem if crude prices continue to rise. The weekly OBV line has stabilized the past three months and signals a shift away from liquidation and aggressive selling. The weekly MACD oscillator has just crossed to the upside for a cover-shorts buy signal on this timeframe.
In this Point and Figure chart of ECA, above, we can see a developing base pattern with a $16 price target.
Bottom line: ECA might experience a $10.75 to $11.75 trading range in the short term, but further upside gains seem likely. Aggressive traders can probe the long side around $10.75, risking below $9.50 and targeting $12 and then $16 longer term.