Trade: Encana (ECA)

Notes:
Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash.  Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.

Today I sold a little more than half of my position in Encana at $23.06.  After getting a decent pop on news that the company is selling off the remainder of it's position of PrairieSky, which was partially spun-out assets formed as a MLP in pipeline that Encana once owned.  This position raises cash for the company and certainly helps bolster their balance sheet.  My guess is they're preparing for a new land purchase similar to what they did earlier in the year by purchasing Eagle Ford shale assets.  Despite the upside potential to my guess, I've decided I need to sell a portion of my position at these levels.  I've chosen this for a few reasons.  First, despite selling at a loss, the stock has climbed over 28% year-to-date and 32% over the last year.  This is a dramatic jump in stock price in a relatively short amount of time.  It could easily be argued that the stock was oversold and playing catch-up now that a new CEO is in place and the company is performing a turn-around in the company's performance.  I would find it hard to argue that were it not for the continued strength in the US dollar, the drop in commodity prices - especially oil and gas, and the fact that demand appears to have weakened some while supplies are strong.  I'm concerned there will be oversupply and lower prices for a number of months and with a stock only yielding 1.2% want to protect myself to the downside while we're not that far off from my target price of $25.  I could consider buying this again if it pulled back near $20, however, I am considering using the cash I've raised to invest into another play in the energy sector with much greater yield support - Ensco, to be particular.  In short, I see too much risk in the energy sector, especially the companies like Encana that have had a strong run over the last  year.  As such, I'd rather risk not making more money and putting it somewhere I feel holds a higher risk/reward ratio, than to hold it and risk the gains I have gotten to date.

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