Is Enerplus Setting Up for a Big Move? – July 12, 2021

Enerplus Corp. (ERF) produces and develops crude oil and natural gas assets in Canada and the United States. Majority of oil production is derived from the Williston and Waterfloods basins, with the Marcellus providing a significant portion of natural gas production.

While production was down last year on account of the pandemic, the company performed well in the second quarter. Production was just under 92,000 Barrels of oil equivalent per day (BOE/D) in the quarter. This was 6% higher than the previous quarter and was driven by increased Marcellus volumes.

The company only had $153 million in cash as of the end of March, but this was still higher than its short-term debt of $83 million. The company is not profitable though, with a net profit margin of -91.4%.

Over the past five years, ERF has grown sales an average of 6%, but was down 20.5% in the past year. Analysts expected earnings to rise 292.9% in the second quarter. The stock appears undervalued with a forward P/E of 5.59.

ERF is up 122.6% for the year, but has shown mixed momentum over the past month as shown in the chart below.

Take a look at the 6-month chart of ERF below with added notations:

ERF has rallied up into a sideways trading range during recent weeks. While in that range, the stock has formed a resistance level at around $7.50 (red), and a level of support at $6.50 (green).

At some point, the stock will have to either break the resistance or the support.  The possible long position in the stock is on a breakout above $7.50. The ideal short opportunity would be on a break below $6.50.

I have explored virtually every flavor of technical analysis and chart pattern known to mankind. The sad fact is that the vast majority of them don’t work at all.

ERF shares were unchanged in premarket trading Monday. Year-to-date, ERF has gained 120.13%, versus a 17.22% rise in the benchmark S&P 500 index during the same period.

Author: Christian Tharp, CMT