Thursday’s TSX breakouts: This stock is locked in trading range, but it has an expected gain of 21%

Concerns regarding the U.S. Federal Reserve's next move will take a back seat for a few months.

Now, investors can shift their focus back to economic data, the upcoming third-quarter earnings season, which kicks off in the U.S. on Oct. 10, and the upcoming U.S. election.

On Wednesday, investors breathed a sigh of relief when the Federal Reserve left rates unchanged and kept their commentary accommodative, giving the green light for buyers to step back into the stock market.

In the U.S., the Dow Jones Industrial Average increased 0.90 per cent, the S&P 500 Index climbed 1.09 per cent, and the Nasdaq composite index advanced 1.03 per cent.

In Canada, the S&P/TSX composite index gained 189 points, or 1.30 per cent to close at 14,711. Every single sector closed the day higher, led by gold stocks. There were 201 securities in the TSX Index that advanced, 43 securities declined in value, and just two stocks closed the day unchanged.

The S&P/TSX composite index is up 0.77per cent month to date, up 4.60 per cent quarter to date, and has a gain of 13.07 per cent year-to-date.

Given the positive market move, on today's TSX Breakouts report, there are 47securities on the positive breakouts list (stocks with positive price momentum), and just nine securities appear on the negative breakouts list (stocks with negative price momentum).

Discussed today is a stock that bounced off of the negative breakouts lists on Wednesday. However, the share price appears to be locked in a trading range. The security highlighted today Suncor Energy Inc. (SU-T)

A brief outline is provided below that may serve as a springboard for further fundamental research.

The company

Calgary-based Suncor is focused on its oil sands operations in the Athabasca region.

After the market closed on July 27, the company reported its second quarter financial results. Suncor's operations were negatively impacted by forest fires in the Fort McMurray region, which temporarily shut down the company's oil sands production. There were no reports of damages to its assets. Cash flow per share came in at 58 cents, ahead of the consensus estimate of 46 cents.

On the second-quarter conference call, Steve Williams, the president and chief executive officer stated in his prepared remarks, "[S]uncor expects to exceed 800,000 barrels per day of production by 2019, so that's over 40 per cent growth in just four years and represents a 6 per cent per share compound annual growth rate between 2015 and 2019. "

The share price increased 1.5 per cent the following trading day.

Subsequent to the second quarter, on June 22, the company completed a bought-deal financing, raising over $2.8-billiion through the issuance of shares at a price of $35 per share.

Dividend policy

Management remains committed to its dividend. The company pays its shareholders a quarterly dividend of 29 cent per share, or $1.16 on a yearly basis. This equates to an annualized dividend yield of 3.4 per cent.

Despite the significant selloff in the price of oil that began in mid-2014, the dividend was never cut.

Valuation

Many analysts value the stock on an enterprise value-to-debt adjusted cash flow or price-to-net asset value basis. The average one-year target price is $41.62, which implies 21per cent upside potential over the next 12 months. Target prices range from a low of $29 to a high of $48.

Analysts' recommendations

According to Bloomberg, there are 18 analysts with 'buy' recommendations, eight analysts with a 'hold' recommendations, and two analysts with 'sell' recommendations.

The consensus cash flow per share estimate is $3.26 cents in 2016, and is expected grow 53 per cent to $4.99 in 2017.

Analysts have been revising their forecasts lower. At the start of the year, the consensus cash flow per share estimate was $4.82 for 2016 and $5.81 for 2017.

Chart watch

The stock has been a laggard in the energy sector. Year-to-date the share price has declined over 3 per cent, compared to a price gain of over 19 per cent for the energy sector in the S&P/TSX composite index.

For the past six months, the share price has been range bound, trading in a channel largely between $34 and $37, providing traders with an opportunity to buy shares at the lower end of the range and sell at the top end of the range.

If the share price breaks out to the upside, breaking above the $37.50 level, the stock price could rally to $40 before facing significant resistance.

If the share price breaks to the downside, there is initial support at its 200-day moving average (at $34.76), and failing that between $33 and $34, and then around $30.

The relative strength index is at 41, suggesting the share price is in neutral territory, not yet oversold. Generally, a reading at or below 30 indicates on 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.