RRC (Long) - Strong outperformance within the energy sector
Fundamentals
Technicals
Trade
- The fundamentals are obviously strong after the last year and a half
- The revenue and profits skyrocketed as the price of oil went up. All the measures possible are flashing green, whether its EPS growth, ROE, ROA, debt-to-equity etc.
- Valuation is still low, just like the wider energy market, due to ESG reasons and just a general unwillingness to participate in the oil industry
- The recession fears are bringing estimates of most measures significantly lower but these aspects have already been accounted for in the price
- I also believe that after the outperformance of the growth part of the market, flows will start circling back from growth into parts of value (energy)
Technicals
- This trade is however more about the technicals than fundamentals
- The thing that attracted me the most to this chart is the outperformance of RRC (bottom of the daily chart) relative to the energy sector, which has been struggling as of late. Despite the weakness in energy and oil, RRC has been accumulating and building a base
- The base was finished after stellar earnings, and is currently on the brink of a breakout
- That would also complete a massive bull flag on a weekly chart
- All your typical indicators are also flashing a buy, while analysts are increasing their price targets
Trade
- As I already mentioned, we are currently on the brink of breaking higher through a crucial resistance level
- The stock is currently consolidating and I am waiting for a signal that the price is about to burst higher, where I would happily buy
- Caveats include mainly a breakdown in the price of oil and fake breakout higher; definitely watch out for these
Follow me for more analysis & Feel free to ask any questions you have, I am happy to help
If you like my content, Please leave a like, comment or a donation, it motivates me to keep producing ideas, thank you :)