Investors are choosing to sit on the sidelines for now, ahead of Friday's U.S. non-farm payrolls report, next week's U.S. election result, OPEC meeting at the end of the month, and the anticipated interest rate hike by the U.S. Federal Reserve in December.
Looking at key commodities, today, the price of oil has stabilized after tumbling to below $47 (U.S.) a barrel on Monday. Meanwhile, the price of gold is recovering, attempting to climb back to the $1,300 (U.S.) an ounce level.
Let's briefly recap what happened on the final trading day of October. The S&P/TSX composite index gained 2 points, or 0.01 per cent to close at 14,787. There were 116 securities in the TSX Index that advanced, 127 securities declined in value, and four stocks closed the day unchanged.
The S&P/TSX composite index closed the month with a gain of 0.42 per cent month. The best performing sector was financials, followed by the consumer staples and utilities sectors. The worst performing sectors were health care, real estate, and consumer discretionary.
On today's TSX Breakouts report, there are 17 stocks on the positive breakouts list (stocks with positive price momentum), while the number of securities on the negative breakouts list (stocks with negative price momentum) expanded to 46.
Discussed today is an energy stock with 18 unanimous buy recommendations and 29 per cent upside potential forecast – Seven Generations Energy Ltd. (VII-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Alberta-based Seven Generations, or simply 7G, is focused on growth from development of its Kakwa River project, a liquids-rich natural gas and light-oil project on the Montney in Alberta. The company has a large resource base with over 400,000 net acres of land providing the company with plenty of drilling opportunities to grow its production.
Before the market opened on August 4, the company reported better-than-expected second quarter financial results. Production rose to a record 117,353 barrels of oil equivalent per day (boe/d), up 87 per cent year-over-year, and an increase of 33 per cent from the previous quarter. This was above the consensus estimate of 114,000 boe/d. The company reported cash flow per share of 66 cents, above the Street's forecast of 52 cents per share.
The company will be reporting its third-quarter financial results before the market opens on Wednesday. For the past five quarters, the day the company releases its quarterly results, the stock price rallies. For instance, on August 4, when the company announced its second quarter results, the share price jumped 10 per cent that trading session, and on May 4, after reporting first-quarter results, the stock price advanced 5 per cent that day.
For 2016, management is guiding to total production of between 120,000 boe/d and 125,000 boe/d.
Dividend policy
Management is focused on growth, and as a result, the company currently does not pay its shareholders a dividend.
Analysts' recommendations
Since the beginning of 2016, 18 analysts have issued research reports on this company. All analysts covering the company agree that this stock is an attractive investment opportunity with 18 unanimous 'buy' recommendations on the stock.
The average one-year target price is $36.96, implying there is 29-per-cent upside potential over the next 12 months. Individual target prices range from a low of $33.50 to a high of $40.
The Street is forecasting strong growth for this company. The consensus cash flow per share estimate is $2.38 for 2016, rising 45 per cent to $3.45 in 2017. Cash flow estimates have fluctuated during the year, but are relative unchanged from the start of 2016. On January 1, the consensus cash flow per share estimates were $2.34 for 2016 and $3.43 for 2017.
Chart watch
Year to date, the stock price has doubled in value, rising 112 per cent. However, over the past six trading days, the share price has fallen 9 per cent, relatively in-line with the decline in the price of oil, which dropped 8 per cent.
Shares of 7G have initial overhead resistance around $30, close to its 50-day moving average of $30.57, and after that around $32, near its closing high set in early October.
There is downside support at $25, and failing that close to its 200-day moving average (at $24.16).
The relative strength index is 27, suggesting the shares are in oversold territory. Generally, a reading at or below 30 indicates an oversold condition.
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The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indices that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.